The idea of your child having £1,000 stashed away that you don’t know about might seem a little farfetched, but it may well be the case for to 700,000 parents in the UK.

It isn’t as suspicious as it sounds however; your little angel hasn’t been hoarding cash under the floorboards. Well, they might be, but that’s another matter entirely. Instead, the money will be sitting in a Child Trust Fund that may have been opened by the Government without your knowledge.

How has this happened?

The last Labour Government announced the Child Trust Fund in their 2001 election manifesto, and launched it in January 2005. An initial subscription was provided in the form of a voucher for £250, with another £250 being given on the child’s seventh birthday.

There were some stipulations however:

  • The child must have been born between September 1st 2002 and February 2nd 2011
  • The parent must be eligible for Child benefit
  • Lower income families received double payments of £500

Around six million children in the UK fit the criteria, and H M Revenue & Customs (HMRC) believe that there are 700,000 dormant accounts holding cash.

How do I know if my child has an account?

If you don’t remember opening an account for your child, they could still have one in their name if the previous Government opened it on their behalf. There are two steps to checking whether your child has an account:

  1. Check the dates. Only children born between September 1st 2002 and February 2nd 2011 were eligible for the voucher
  2. If your child fits the criteria, enter your details on the HMRC website here

HMRC aim to respond to any enquiries within 15 days, stating how much money is in your child’s account, if they have one, plus details of where it is being held.

What should I do if my child has money in an account?

Whilst the money in a Child Trust Fund cannot be accessed until the child turns 18, you essentially have two options:

  • Keep the money in the Child Trust Fund
  • Transfer it to a Junior ISA

If you choose to keep the money in the Child Trust Fund, you could start to pay into it on behalf of your child. The limit that you, friends or family can pay into the account each year, called the ‘subscription limit’ is £4,128. One thing to bear in mind is that the subscription limit resets on the child’s birthday, rather than at the start of the tax year.

At the time of writing this, all Junior ISAs have better rates of return than Child Trust Funds. If you intend to use the account to start saving for your child, transferring the money to a Junior ISA may be the best thing to do. The annual allowance is the same, at £4,128, with both cash and stocks & shares options being available.

How do I transfer the money into a Junior ISA?

Transferring from a Child Trust Fund to a Junior ISA is a relatively simple process. The first thing to do when researching providers, is to ask them if they accept Child Trust Fund transfers, and to ask if a fee is payable to make the switch. Once everything has been checked, the account details that HMRC provided will be given to the provider and the transfer will be completed.

For lower earning families who would have received the full £1,000 in vouchers, this is useful money that can be accessed by the child once they reach the age of 18. This won’t be too far away, as the oldest eligible children will now be approaching the age of 15. If you have any questions or queries about Junior ISAs, professional advice can help you to make the most of your child’s savings.