I’m a dad-of-three – I discovered £549 in a lost bank account for my daughter and you can do it too
DAD-OF-THREE Matthew Elsom was delighted to discover that his daughter had hundreds of pounds in a little-known savings account.
His daughter Audrey, who’s a student at Nottingham University, is “over the moon” with the find and will use the free cash to fund a holiday abroad.
Like many, the 19-year-old was once one of over six million children to have held a child trust fund (CTF).
The problem was, 50-year-old Matt had lost track of the account over time.
This meant that Audrey had £549 worth of free cash sitting in an account untapped.
Child trust funds were long-term tax-free savings accounts for children born between September 1, 2002, and January 2, 2011.
The government gave eligible parents vouchers worth up to £500 to invest in these accounts which would grow in value before maturity when the account holder turned 18.
Matt, who works in IT startups, said: “We’ve moved around a lot and since Audrey was born in Prague it was super easy to lose track of the fund.
“This was up until I spoke to a friend 18 months ago who told me about a new tool called Gretel which allows you to search for lost accounts for free.”
“I honestly had no idea who the CTF was with or how much cash was in there so thought the tool could be a useful option because at the time I wasn’t aware that they could be traced on the government website.”
All Matt had to do to locate the lost account was sign-up to Gretel’s online dashboard and within four weeks he discovered that Audry had £549 sitting in a CTF with Forresters.
“The sign-up process was super quick and easy. All I had to include was our previous home addresses and Audrey’s National Insurance number and voila,” said Matt.
Matt was “ecstatic” after the find and rushed to tell his daughter who was studying at university at the time.
Audrey said: “My dad called me out of the blue and told me that I had £549 sitting in an account that I could withdraw.
“As I’m still young, I’m going to use the cash to help towards a holiday as I want to do some travelling while I can.”
Those who’ve reached 18 have a wide variety of options on what to do with the cash.
Some, like Audrey, may choose to transfer it to their bank account and spend it, but others have the option to invest it – we explain your options in detail below.
Right now, over 145,000 child trust funds sit unclaimed, according to National Audit Office (NAO).
And figures released by the government back in October 2022 suggest that these teenagers could have an average of £2,100 in their CTF waiting to be claimed.
Duncan Stevens, chief executive of Gretel said: “Our ultimate ambition is to help solve the longstanding issue of dormant assets in financial services.
“While it may just be the tip of the iceberg when you consider the entire financial services landscape, there is still a staggering £2.2billion sat unclaimed in CTFs in the UK.
“For many children, CTFs were set up at birth and long forgotten during the 18 years until they matured.
“When you add the potential for house moves and other life changes in, it’s easy for people to lose touch with them.
“We want to get the money from “lost” CTFs back to the younger generation where it could make a huge difference to their lives.”
But, it is important to understand that households don’t have to sign up to Gretel to locate a lost CTF.
Parents can contact the HMRC directly and ask them to trace lost accounts – we’ve explained everything you need to know below.
How did child trust funds work?
When CTFs became available, HMRC sent the parents or guardians of qualifying children a starting payment voucher of £250 (or £500 if they were on a low income).
This voucher could then be used to set up a CTF account in the child’s name.
If you didn’t use the voucher within one year, HMRC would set up a CTF account in your child’s name on your behalf.
Money in a Child Trust Fund account belongs to the child and is “locked in” until they turn 18.
There were three types of accounts that could be opened with the voucher:
- Cash Child Trust Fund: This is where you could make deposits just as you would for a bank or building society account, which can earn tax-free interest.
- Stakeholder Child Trust Fund: This is where the savings in the account are put into a wide mix of low-risk stock market investments.
- Shares-based Child Trust Fund: The savings in the account could be put into the stock market via an investment fund of your choice or select your own investments.
The savings would grow over time thanks to tax-free returns.
How can you claim child trust funds?
A CTF matures on the account holder’s 18th birthday.
At this point, the child automatically takes over the account and no more money can be added.
Until your child withdraws or transfers the money, it stays in an account that no one else has access to.
If you are one of the tens of thousands of young adults who haven’t claimed their account, the government has an online tracing service where you can find out if you have one and which provider it’s with.
To find out more, you’ll need a government gateway login and National Insurance number.
If you are a parent looking to find out about your child’s fund you can either access it online, or you’ll need to send a letter to HMRC with the following details:
- Full name and address
- Child’s full name and address
- Child’s date of birth
- Child’s National Insurance number or Unique Reference Number if known
What can you do once you’ve claimed the money?
While it might be tempting to spend all the cash at once, there are other options available to you.
Households can request the cash directly to their bank account, transfer it into an ISA or invest it.
Here are the full details of what can you do.
Cash it in
You can ask your CTF provider to hand over the money and get it paid into a bank account.
You’ll need to share the bank account details you wish to transfer the cash into with HMRC.
Remember you’ll need to be at least 18 before you can cash out the savings.
Transfer it into an ISA
You can transfer it into an ISA.
An ISA is an Individual Savings Account and you don’t pay tax on the interest you earn in these types of accounts.
You can have a cash ISA – although the interest rates on these are typically lower than a standard savings account – or a stocks and shares ISA, which lets you invest the money if you don’t mind taking some risk.
A good option for young people saving to buy their first home is the Lifetime ISA.
You can stash £4,000 a year into these accounts and the government will give you a 25% bonus on your savings as long as you use it to buy your first property, or if you wait until retirement age to access the cash.
It won’t incur income or capital gains tax and will sit until the account holder does something with it.
This isn’t a great option though as your money won’t be earning interest, which means its value in real terms is often eroded by inflation.