Some £1.2 billion is sitting abandoned in savings accounts that were part of a botched attempt by Labour’s Tony Blair and Gordon Brown to help children.
Around two-thirds of this is taxpayers’ money that was given to parents to invest on behalf of their children and will be wasted unless it can be reunited with them.
Banks and building societies say, in most cases, families have moved away and they do not have up-to-date contact details to get in touch with them.
Missing cash: Child Trust Funds (CTFs) were launched by the Blair administration in 2005, in a bid to encourage parents to save for their children’s future
It means that hundreds of thousands of children could have as much as £2,000 sitting in an account they know nothing about.
The forgotten money is being held in tax-free savings accounts known as Child Trust Funds (CTFs).
These were launched by the Blair administration in 2005, in a bid to encourage parents to save for their children’s future.
Under the flagship scheme, the Government initially offered families a £250 voucher when their child was born and another £250 when they reached the age of seven.
Children from lower-income backgrounds were given £1,000 in total.
The idea was that the child’s family would continue to top up the account each year so that, eventually, they would have a decent pot of money to put towards university fees or a deposit for a house.
Chancellor Gordon Brown launches the Child Trust Fund scheme in 2005
The annual limit for how much extra parents can invest into the accounts this tax year is £4,260.
If parents failed to invest the initial voucher, then the taxman opened an account on the child’s behalf.
The vouchers were given to six million children born between September 1, 2002 and January 1, 2011 — when the scheme was axed, because it cost too much money.
Before it was scrapped entirely, the scheme was heavily scaled back, which meant that children born between August 2010 and January 2011 received only a £50 voucher — or £100 if they were from a lower-income family.
Payments to children aged seven also stopped in August 2010.
Child Trust Funds were replaced with Junior Isas, which offered no Government incentive, but often better interest rates.
Money Mail campaigned for two-and-a-half years so that parents could move their money from Child Trust Funds to these new Isas.
Once a child turns 16, they can begin managing their investment themselves, but they cannot withdraw the money until they reach 18.
It means that those born in September 2002 are, from this month, the first children able to take control of their money. However, experts believe that around one in eight Child Trust Funds (around 12 per cent) is lost.
With an estimated £10 billion held in Child Trust Funds, it means that these lost accounts may contain as much as £1.2 billion, according to OneFamily, the largest Child Trust Fund provider, which is responsible for one in four accounts.
Of this, it estimates that around £800 million is the initial taxpayer money paid in by the Government and the remaining £400 million is investment returns.
The average Child Trust Fund balance is £2,175, according to OneFamily. But, even if parents just took the vouchers and never topped up the accounts with extra money, they could still have more than £1,000, thanks to investment returns.
With an estimated £10 billion held in Child Trust Funds, it means that these lost accounts may contain as much as £1.2 billion
This is because the vast majority of vouchers were put into accounts that invest in stocks and shares that have done better over the years than if the money had been kept in cash.
For example, OneFamily said that its fund has made a 108 per cent return over the 13 years the money had been invested — turning £500 into just over £1,000.
Poorer families would have more than £2,000 — even if their parents hadn’t invested more.
Steve Webb, former pensions minister and policy director at investment firm Royal London, says: ‘This is a serious amount of taxpayer money. The Government needs to be proactive in reuniting people with money that is rightfully theirs.
‘It should be looking at writing to families to remind them that they may have money sitting in one of these accounts.’
Co-founder of savings advice website Savings Champion, Anna Bowes, says: ‘This was a scheme designed to help children by giving them a little something as they came into adulthood — it’s a huge shame that so many children are not going to enjoy that benefit, some of which will have been funded by the taxpayer.
‘It makes sense for anyone who thinks that they have lost their Child Trust Fund to try to find it.’
HM Revenue & Customs (HMRC) said responsibility for providing information about the accounts is with the providers.
There are about 70 authorised Child Trust Fund providers, including OneFamily, The Share Centre, Halifax and Yorkshire Building Society.
Many are working with Royal Mail to try to trace families who have moved away.
If someone does not know where their Child Trust Fund is held, the easiest way to track it down is to visit HMRC’s website and fill out a form.
To do this, you will need to register for a Government Gateway account if you do not have one.
HMRC should then write to tell you where it is held.
Steve Ferrari, managing director of Child Trust Funds at OneFamily, says: ‘Even if parents remember who their provider was, there has been lots of change in the marketplace and the company looking after the Child Trust Fund may well have changed.
‘OneFamily looks after Child Trust Funds originally offered by 35 different companies.’