Teenagers risk miss­ing out on sav­ings pots

The Malta Business Weekly - - INTERNATIONAL -

Any­one turn­ing 16 from now can start man­ag­ing their Child Trust Funds for the first time - al­though some may be un­aware that they have these sav­ings.

These funds were set up by the Labour gov­ern­ment in 2005 to en­cour­age par­ents to save for their chil­dren and to pro­mote fi­nan­cial aware­ness.

They be­gan with an au­to­matic con­tri­bu­tion from the gov­ern­ment.

Cam­paign­ers worry that hun­dreds of thou­sands re­main un­aware of the money, which would to­tal hun­dreds of pounds.

Ini­tially, the gov­ern­ment pro­vided a £250 voucher in the child's first year and the same amount again when they reached the age of seven, to be in­vested in cash or stocks and shares on the child's be­half un­til he or she turned 18. Chil­dren born from Septem­ber 2002 were el­i­gi­ble.

If the child was born into a fam­ily with a low house­hold in­come then the pay­ments to­talled £500.

In Au­gust 2010, those sums were re­duced to £50, or £100 for those in low-in­come homes.

These stopped en­tirely in Jan­uary 2011 dur­ing the coali­tion gov­ern­ment, but in the mean­time six mil­lion young peo­ple were as­signed these sav­ings, which could be topped up by their fam­ily, friends or the chil­dren them­selves.

These ac­counts re­main, al­though some peo­ple would have switched them into Ju­nior Isas.

Septem­ber marks 16 years since eli­gi­bil­ity for the first funds be­gan and, un­der the rules, any­one turn­ing 16 can ap­ply to take over the man­age­ment of their fund from their par­ents, their car­ers, or the UK tax author­ity.

Al­though they are un­able to with­draw these sav­ings un­til they turn 18, they will still be able to man­age their ac­count such as choos­ing which provider over­sees their in­vest­ment. An es­ti­mated 75,000 young­sters will turn 16 in Septem­ber alone, giv­ing them the op­por­tu­nity to do so.

How­ever, more than one mil­lion of these funds are "lost" to the young­sters who are sup­posed to ben­e­fit from them, ac­cord­ing to Gavin Old­ham, chair­man of the Share Foun­da­tion, which ad­min­is­ters Child Trust Funds for chil­dren in care.

He said that these funds - in­clud­ing about 440,000 for chil­dren from dis­ad­van­taged back­grounds - were opened al­most en­tirely by HM Rev­enue and Cus­toms on the chil­dren's be­half, when their par­ents had not done so within the first year of their birth.

They would prob­a­bly have re­ceived a let­ter when the fund was set up, but may have ig­nored it or moved away. Typ­i­cally, the fund is now worth £1,600.

"There should be a special ef­fort from the gov­ern­ment to re-link these [funds] to the young peo­ple to whom they be­long," he said.

HMRC has a ded­i­cated ser­vice to help peo­ple find out where their Child Trust Fund is held.

The tax author­ity wrote to par­ents as their child be­came el­i­gi­ble for a Child Trust Fund and, af­ter that, any com­mu­ni­ca­tion should have been be­tween them and the provider of the trust fund ac­count.

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