Did you put money away for your child in a fund years ago and have only just remembered about it?
If so, thousands of children's forgotten savings are set to be moved into Isa accounts automatically, in order to stop them from losing any tax-free benefits.
Forgotten Child Trust Funds
According to OneFamily, around six million children have a Child Trust Fund (CTF), but research suggests many of these have been forgotten about.
It’s estimated that £700 million worth of savings in around 800,000 CTF accounts are set to age this year, meaning that money could lose its tax-free status.
However, new rules have been introduced by the Treasury, which will now allow banks and building societies to move money into an Isa account if they haven't heard from the parent or account holder before they turn 18.
These new rules will stop the money from becoming subject to tax, but the providers don't have to offer an interest rate on these accounts, which means you may want to move the money sooner rather than later.
Will these accounts have to follow the usual Isa rules?
These CTF accounts will be exempt from the usual Isa rules, such as regulations that limit savers to putting money into only one Isa account a year.
These accounts will not count towards the £20,000 a year cap on how much you can save into an Isa tax-free.
The new Isas will be opened with the same bank or building society that holds the CTF, butif the provider does not offer this type of account, the CTF will then be turned into a ‘protected account’, which will abide by the same rules as the Isa.
The money can then be transferred into an Isa of the youngster’s choice when rediscovered, without it contributing to their annual limit.
Thousands of children's forgotten savings are set to be moved into Isa accounts automatically, in order to stop them from losing any tax-free benefits (Photo: Shutterstock)
Who will this move affect?
This automatic transfer will affect those who turn 18 from September this year and who haven't used their Child Trust Funds (CTFs) recently.
Children born between September 1 2002 and January 2 2011 all qualified for a tax-free children's saving account from the government.
Last decade, this CTF scheme issued parents a £250 voucher when a child was born between September 1, 2002 and August 2, 2010.
However, from August 3 2010 the amount then dropped to one £50 voucher - but low income families received double.
Parents were then allowed to choose to open one of three types of CTF. This included a stakeholder account, a share account or a cash account.
Gov.uk explains that if you already have a CTF: “You can continue to add up to £4,368 a year to your CTF account. The money belongs to the child and they can only take it out when they’re 18. They can take control of the account when they’re 16.
“There’s no tax to pay on the CTF income or any profit it makes. It will not affect any benefits or tax credits you receive.”
What do I need to do to recover a Child Trust Fund?
First, you need to check if your child has one - your child must have been born between 1 September 2002 and 2 January 2011.
You will then need to log in on the HRMC website. To do this you either need to sign into the government Gateway website, or sign up for an account.
You should then fill out the form with your child’s details. However, to do this you need to be the parent or legal guardian of the child.
When will I know if this has worked?
HMRC will usually get back to you within 15 days.
For more information, visit: gov.uk/child-trust-funds