Are You One of the 728,000 Brits Missing Out on a £2,200 HMRC Payout?

Hundreds of thousands of young people in the UK may be missing out on substantial payouts from the government, specifically through Child Trust Funds (CTFs). According to Martin Lewis, founder of Money Saving Expert, approximately 728,000 individuals are unaware that they are owed an average of £2,212 each from this savings scheme. The CTF accounts, initiated by the government between 2002 and 2011, were designed to encourage saving for a child's future. However, many have lost track of these accounts or forgotten they exist. Fortunately, checking eligibility and claiming these funds is a straightforward process that does not require the assistance of third-party firms.

Last updated: 20 October 2023 (BST)

Key Takeaways

Child Trust Funds were established for children born between 2002 and 2011.
Over 728,000 young people may be unaware they are eligible for payouts averaging £2,212.
Parents could top up these accounts with a maximum limit of £9,000.
The funds are tax-free and do not affect benefits or tax credits.
Claiming your funds is free, and using third-party services is discouraged.

Understanding Child Trust Funds

Child Trust Funds were introduced as part of a government initiative to promote savings among young people. Each eligible child received an initial voucher worth £250 from the government when born, with an additional £250 provided at the age of seven. Families with lower incomes received a higher initial contribution of £500. Parents could also add money to these accounts, potentially growing the total to £9,000.

How Child Trust Funds Work

These accounts are designed to be tax-free, allowing the money to grow over time without any tax implications. Once the child turns 18, they gain access to the funds, which can be used for various purposes, such as education, purchasing a home, or starting a business.

The Current Situation: Who is Affected?

Research indicates that around one in six eligible young people may not even be aware that their Child Trust Fund exists. This lack of awareness can lead to significant unclaimed funds, estimated to be around £2,212 on average per account. The accounts opened between September 1, 2002, and January 2, 2011, are particularly relevant, as they fall within the eligibility range.

How to Check Your Eligibility

If you suspect you may have a Child Trust Fund, the process for checking your eligibility is straightforward. Here is how you can do it:

Gather necessary information: You will need your National Insurance number and date of birth.
Contact HMRC: You can either do this online through the Government's website or request details by post.
Wait for a response: After submitting your request, you should receive a response within three weeks.

It is important to note that this service is free of charge. Avoid third-party companies that offer to track down your funds for a fee, as they may take a significant portion of your payout.

What to Do if You Find Your Money

Once you have claimed your Child Trust Fund, you may find that the savings rates are not competitive, as these accounts are no longer actively managed. Martin Lewis advises considering alternative savings options to maximise your return. Here are a few suggestions:

Transfer the funds to a Junior ISA, which typically offers better interest rates.
For those over 18, consider a Lifetime ISA (LISA) or a traditional savings account.
If you have outstanding debts, prioritising repayment may be a wise choice before investing the funds.

The Importance of Awareness

Martin Lewis has emphasised the need for individuals to take charge of their finances and be aware of their entitlements. With many young people oblivious to the existence of their Child Trust Funds, the potential for unclaimed funds remains high. Parents and guardians are encouraged to discuss financial matters with their children, ensuring that they are informed about any savings accounts they may have.

Conclusion

Child Trust Funds represent a significant opportunity for young people to secure a financial future. With a substantial number of accounts left unclaimed, it is crucial that those eligible take the necessary steps to locate and access their funds. Understanding the mechanics of these accounts and making informed decisions about how to manage the money can lead to greater financial security. Have you checked to see if you are one of the many eligible individuals? The time to act is now!

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FAQs

What is a Child Trust Fund?

A Child Trust Fund is a government-backed savings account for children born between 2002 and 2011, designed to encourage savings and provide financial security when they turn 18.

How can I find out if I have a Child Trust Fund?

You can find out by contacting HMRC online or via post. You will need your National Insurance number and date of birth to initiate the process.

Is there a fee to claim my Child Trust Fund?

No, claiming your Child Trust Fund is free. Avoid third-party companies that charge fees for this service, as they can take a portion of your payout.

What should I do with the money once I claim it?

Consider transferring the funds to a Junior ISA or exploring other investment options like a Lifetime ISA, especially if you have debts to pay off.

When can I access my Child Trust Fund?

You can access your Child Trust Fund once you turn 18. Before that age, the funds are managed by the account holder's parents or guardians.