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Millions of pounds sitting in untouched government allocated child trust funds

Posted in: Corporate

  • Every child born in the UK between 1 September 2002 and 1 January 2011 received a child trust fund
  • 8 million were invested by the government on behalf of parents who didn’t choose a provider in time – around 30% of all child trust funds
  • Savings in the oldest of these accounts could be worth £2,000 even if there have been no additional top ups
  • With the eldest children who benefited from the scheme just months away from turning 17 years old, OneFamily is urging families to track down their accounts
  • OneFamily manages one in four child trust funds

Millions of pounds are sitting in untouched child trust funds that were set up by the government on behalf of parents for children born as long as 17 years ago.

Every child born in the UK between 1 September 2002 and 1 January 2011 received a child trust fund voucher. The initial voucher was worth between £250 and £500, with some children benefiting from a subsequent voucher of the same amount. Parents had up to a year to choose a child trust fund provider and in the event, they didn’t invest the voucher this was done on their behalf with a select number of providers including OneFamily.

OneFamily invested the vouchers into stocks and shares on behalf of the parents and the oldest of these will have grown significantly due to investment returns that have been added.

Despite the strong financial performance of these funds, many of them remain inactive, as parents are unaware of which provider is managing their child’s account, nor how they go about finding out. With a sizeable number of these account holders now not traceable, having moved or changed name, many are missing out on information about their child trust fund. 

To help address the issue, OneFamily has set up a dedicated page to help parents and children over 16 to find their account.

For the child trust funds that have been invested since the launch of the scheme the approximate value would be as follows:

Initial government voucher, invested April 2005

Second government voucher (paid when child turned seven years old)[i], invested September 2009

Current account value[ii], April 2019

£500

£500

£1,992

£250

£250

£996

Child trust funds gave parents a head start in saving for their child’s future, as well as ensuring that every child arrived at adulthood with a nest egg, no matter what their background. Parents, family, friends and even the child themselves can save money into a child trust fund, from as little as £10 a month to up to £4,368 a year.

The old adage of saving little and often soon adds up is demonstrated by those parents, who have taken the opportunity to top up the accounts. For example, for those 17-year-old teens whose parents saved just £10 a month, based on a £500 government investment, will now have £3,610 in the account, a bonus of nearly £2,000[iii]. With the youngest child trust fund beneficiaries still just eight years old, there is plenty of opportunity to give children a sizeable sum at age 18.

The money saved in a child trust fund can be accessed by the child at age 18 and can either be reinvested into a similar adult ISA or can be used to fund more immediate expenses such as university fees.

Steve Ferrari, Managing Director of Child Trust Funds at OneFamily commented:

“Parents have enough to think about when a child comes along, so it’s not surprising that thinking about where to invest their voucher wasn’t top of their to-do-list. Fortunately, the government asked providers like OneFamily to look after the money on behalf of the parents, so their children won’t have missed out on the growth in value.

“The vouchers that were invested in stocks and shares, like those managed by OneFamily, will have done particularly well. Other providers offered cash-based products which will also have grown in value, albeit not at the rate of stocks and shares. 

“The good news is there is still plenty of opportunity to earn money from these accounts. We are urging parents to track down their child’s account and if they haven’t already consider topping them up, or if they are in cash, parents should consider moving them into stocks and shares, which are proven to outperform cash over the long-term. As a provider that looks after one in four child trust funds we have created a dedicated page to help parents find their child’s account.”

To find out more about OneFamily child trust funds visit: www.onefamily.com/savings-and-investments/children/child-trust-fund

[i] Depending on their family’s wealth, children either received a total of £500 or £1000

[ii] As at 03/4/2019

[iii] This is based on an initial government voucher being invested of £250 being invested April 2005, an additional £250 voucher when the child turned 7 September 2009. Parents would have invested £1680 of their own money. £3,609.7 – £1,680 = £1929.7