Parents of children born between 2002 and 2011 may be owed payments of over £2,000 if they paid into a Child Trust Fund which they have since lost track of, according to the Financial Conduct Authority (FCA).
With students heading back to college and university this month, the FCA is encouraging young adults and their parents to check whether they paid into a Child Trust Fund which has since been forgotten.
Unclaimed funds worth £2,240 on average
Data from HMRC reveals that 760,000 matured Child Trust Funds, valued at an average of £2,240 each, have yet to be claimed. This indicates that hundreds of thousands of young people might be forfeiting money that could contribute towards new laptops, textbooks, rental deposits or the daily expenses of student life - or establishing savings for their future.
Certain companies, including those promoting their services on social media, are proposing to 'locate' and claim Child Trust Funds on individuals' behalf - but this often comes with a catch, as they will expect a fee or cut of the final payout.
Beware of paid tracing services
The FCA has encountered instances where customers were billed £400 to trace the account and has even witnessed some firms imposing a monthly subscription for a one-off tracing service. However, missing funds can be tracked down free of charge without surrendering a single penny in the process.
Chris Knight, director of insurance at the FCA, said: "A Child Trust Fund can be a welcome source of extra cash at a time when many young people need it most. But you don't need to pay someone else to claim what's rightfully yours - tracing and accessing your own Child Trust Fund costs nothing, so think twice about handing over a chunk of your savings to a claims firm for a job you can do yourself."
Myrtle Lloyd, HMRC's chief customer officer, said: "If you're between 15 and 24, you could be sitting on a savings payout and not even realise it. Just search 'find my Child Trust Fund' on GOV.UK to find your savings account today."
How to check if you have a Child Trust Fund
Those aged 18 or above, born between 1 September 2002 and 2 January 2011, may have an unclaimed Child Trust Fund waiting for them. Verifying this is both simple and completely free.
If you are aware of which provider holds your Child Trust Fund, you can get in touch with them directly to arrange a withdrawal or transfer. Should you be uncertain about where your account is held, HMRC's complimentary online tracing tool is available to help you locate it.
You will be required to verify your identity with the provider, however there is absolutely no charge involved. Certain firms regulated by the Financial Conduct Authority (FCA), such as claims management companies, may offer Child Trust Fund tracing services. However, as the tracing process itself does not typically require FCA authorisation, companies providing this service may fall outside the FCA's cap on claims management fees, leaving customers potentially unable to escalate complaints to the Financial Ombudsman Service.
FCA review into Child Trust Funds
The FCA has additionally announced a comprehensive review into Child Trust Funds. The investigation will examine several key concerns, including instances where young adults become unreachable upon turning 18, potentially losing access to their savings entirely.
The review will further scrutinise how firms are upholding fair value for Child Trust Fund customers in line with Consumer Duty obligations, as well as identifying any obstacles preventing vulnerable young adults from accessing their funds. The findings are expected to be published next year.
