Do you have £1,500 ‘languishing’ in a Child Trust Fund? How to track ‘lost’ cash down

Junior ISA: Nationwide explain benefits of setting up account

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HMRC released savings data today which showed huge amounts of money is sitting idly in CTFs. This, according to expert analysis, could be costing families thousands of pounds.

CTFs are a long-term tax-free savings account designed for children and while holders of these accounts can continue to save into them, they are now closed to new applicants.

Instead, families can save into Junior ISAs (JISA) for their children and today, HMRC shared how both of these products are being utilised.

The data covered the 2019/2020 tax year and in examining the figures, Hargreaves Lansdown (HL) discovered the following:

  • In April 2020, there was still £9.2billion in Child Trust Funds.
  • The average holding was £1,500.
  • There were 6.3 million accounts opened. 1.8 million of them were opened by HMRC after parents didn’t make a choice.
  • 5.1 million Child Trust Funds didn’t have any money paid into them during 2019/20.
  • In 2019/20 we paid £971million into around one million JISAs – up from 954,000 a year earlier.
  • The total held in JISAs was £5.4billion

At an initital glance, this may not be cause for concern as both CTFs and Junior ISAs provide similar incentives.

However, Sarah Coles, a personal finance analyst at HL, broke down how utilising a CTF over a Junior ISA could prove costly.

She said: “In April last year, there was still £9.2billion languishing in CTFs.

“The vast majority of accounts had nothing paid into them during the year, and millions of accounts may have been lost along the way. Those who are paying into them may well be better off elsewhere.

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“If you’re paying into a CTF, it might feel like an easy option for putting away a nest egg for your kids: you already have the account, so you may as well make use of it.

“However, it has much less to offer than a Junior ISA, and you can now switch from one to the other.

“The two accounts have the same tax benefits; the annual limit is the same; the money is still locked away until the age of 18; and it will belong to the child at that stage.

“However, the JISA has a number of advantages. If you’re keen to keep your money in cash, they tend to offer much more competitive rates.

“At the moment you can get 2.5 percent on a JISA, while the best CTF is offering two percent.

“If you’re in an investment CTF you may be paying over the odds in charges because stakeholder CTFs are essentially trackers capped at 1.5 percent.

“JISAs are usually much cheaper; an equivalent tracker is almost a third of the cost. CTFs also often offered a fraction of the investment choices available through the JISA.”

Those who set up a CTF for a child are known as the “registered contact” and these people are the only ones who can manage the account.

Money held within a CTF can be transferred to a JISA but as CTFs closed up, many families may have lost track of their accounts.

Fortunately, there are options available for those looking to track down their funds and Sarah concluded on this: “If you’ve lost track of your child’s CTF, if you picked your own fund, or topped it up, start by checking if you have any paperwork.

“If you didn’t get round to making a decision, the government would have chosen a stakeholder CTF for you.

“If you don’t know where that is, you can track down your CTF through the government website – as long as you have parental responsibility for the child.

“You need to sign into the Government Gateway, or sign up for an account.

“Then you can fill out a form with your child’s details, and they will inform you of the provider holding your child’s CTF.”

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