Teens could cash in on ‘forgotten’ saving trusts
FAMILIES will begin cashing in on a child trust fund bonanza next week – but as many as one in six may not even know that they are in line for a windfall.
From September 1, teenagers turning 18 will become the first to get their hands on cash from a government scheme that has been accumulating since they were born.
While middle-class families who topped up state vouchers could get up to £55,000, thousands left it to the Government to invest on their behalf and may not realise they are due smaller payments.
Millions who benefited from the scheme will be able to cash in over the next nine years, with around 55,000 gaining access to the money every month.
Child trust funds were offered to those born between September 1, 2002 and January 2, 2011 under a Labour scheme to encourage parents to save for their children. Children got one £250 voucher when they were born – or £500 if they were from a low-income family – and another on their seventh birthday.
Parents could save the money in cash or invest it in the stock market and it cannot be withdrawn until the child’s 18th birthday. If they failed to deposit the cash within a year, the Government invested it on the child’s behalf. Many teenagers about to turn 18 will have no idea it exists.
Even parents who invested the money may have lost track of where it is now as many banks and building societies have since been taken over. Families may also have changed address, meaning providers do not have contact details for them.
Around 430,000 accounts are due to mature between September and April, the trade body the Association of Financial Mutuals said. It is estimated that 70,000 – one in six – are dormant.
Money not claimed immediately can be accessed in the future. In the meantime it remains invested. However, it is thought up to a million of the funds – worth around £2.2billion – could be ‘lost’, according to the tracing service Gretel. If the £250 vouchers had been left in accounts earning an average of 2 per cent interest, they would be worth £668 today, said the investment firm AJ Bell. If invested in the FTSE 100, they would be worth £1,198.
Parents could also top up the funds by an annual limit currently at £9,000. Families who invested the maximum in the stock market every year, on top of the vouchers, would have accrued around £55,000, AJ Bell said. Around half of teenagers with the funds are set to receive more than £5,000.