Over half a million teenagers are set to inherit 'hidden' savings pots, as the first round of 550,000 Child Trust Funds held by investors is set to mature next week.
Child Trust Funds were savings accounts set up by the government for children born between 2002 and 2011.
The tax-free savings accounts enabled parents, children or guardians to save money which could only to be accessed after the child's 18th birthday.
Anyone with a live Child Benefit claim between 1st September 2002 and 2nd January 2011 ought to have been sent a £250-£500 voucher to make an initial deposit into their child's Trust Fund.
Some 6.3 million accounts were set up over the time the scheme was active. The majority were opened by parents. However, nearly 2 million accounts were opened by HMRC on behalf of the child where parents or guardians did not open an account.
As the first batch of teenagers to have benefited from the scheme will turn 18 years old next week, they will be able to withdraw or reinvest in their Child Trust Funds for the first time.
We want to make sure all young people can access the money which has been set aside for them, to invest in their future and continue a savings habit, as they turn 18.Said Economic Secretary to the Treasury, John Glen.
Under the policy, introduced by Labour ex-Chancellor Gordon Brown, families could deposit up to £9000 per year into the account without paying any tax on the savings or profit earned by the savings.
According to HMRC, the policy was intended to help young people establish healthy financial habits and provide them with a small sum to help them get off to a good start.
The scheme was abolished by the Conservative-Liberal Democrat coalition as part of austerity measures in 2011.
However, according to HMRC and independent research, thousands of young people may not even be aware that there is money waiting for them in a savings account.
We recently surveyed 13,000 parents of young adults aged 16 and 17 in the UK. Staggeringly, a third did not know whether their teen has a child trust fund or not. This means that those about to turn 18 could be missing out on thousands of pounds from the Government, intended to give them a solid financial stepping stoneSaid Director of Unity Mutual Steve Code.
Around 55,000 accounts are expected to mature each month starting from September.
However, the savings are not managed by HMRC, so those wanting to track down an account will have to look elsewhere.
If you’re unsure if you have an account or where it may be, it’s easy to track down your provider onlinesaid the Treasury’s Mr Glen
HMRC advertised a special search tool for people who are not sure whether they have a trust fund in their name or not.
How does Money Savings Advice work
Money Savings Advice is an independent editorial company providing detailed information about numerous financial niches with the aim of helping consumers make informed financial decisions. We aim to provide hints, tips and techniques to help you make your money work for you. However, we are not perfect, and we accept no liability if anything we write about goes wrong.
Money Savings Advice is a trading name of RMM Digital Publishing Ltd. Registered trading address, First Floor, 85 Great Portland Street, London, W1W 7LT. Trading in England and Wales, company number 11550143 with data protection number ZA747669.