Back to school news! As thousands of young adults head back to college and university this month, many of them are sitting on a forgotten pot of savings without realising it.
Our friend the FCA has just published figures from HMRC showing that 760,000 matured Child Trust Funds, worth an average of £2,000 each, are still unclaimed.
That's a lot of money that could be going towards laptops, textbooks, rent deposits, student union beers (just kidding) or even a first step into savings. And it’s sitting untouched simply because nobody's come looking for it.
We're breaking down what this means for advisers with clients who might be affected, and what to do about it. Let's go.
Anyone aged 18 or over who was born between 1 September 2002 and 2 January 2011 could have a Child Trust Fund waiting for them.
The scheme is closed to new applicants now, but about 6.3 million accounts were opened while it was running, and existing accounts will keep maturing until 2029.
For advisers, that means two groups worth thinking about: clients who are in that birth window themselves, and clients with children who are in it.
Some sneaky firms are already advertising on social media, offering to "find" and claim Child Trust Funds on people's behalf, often for a hefty fee or a cut of the final payout.
The FCA has seen cases of customers charged £400 to locate an account, and even firms charging a monthly subscription for what should be a one-off tracing job.
Tracing and claiming a Child Trust Fund is free. I repeat: this is free!
It can be done directly, either by contacting the provider if it's already known, or through HMRC's free online tracing tool on GOV.UK.
There's also a protection gap to flag. Tracing a Child Trust Fund doesn't generally need FCA authorisation, even when it's offered by a regulated claims management company. That means the FCA's cap on claims management fees may not apply, and customers may not be able to take a complaint to the Financial Ombudsman Service if things go wrong.
The FCA has also launched a review into Child Trust Funds.
It’s going to look at young adults who can't be contacted when they turn 18 and risk losing touch with their savings altogether, whether firms are delivering fair value under Consumer Duty, and whether vulnerable young adults face barriers accessing their own money.
The review is due to report next year – so this isn’t one-off news. We’ll keep an eye on it and follow up with what happens next.
Although this is not advisers’ typical target market, it is helpful to make your clients and their children aware. Perhaps the natural transition is to move funds into an ISA.
It's a good time to build the message into client conversations, especially now with back-to-college season putting it in the news.
What to do now:
If you're not sure how to raise this with clients, or want help weaving it into your wider planning conversations, get in touch today.
We love to chat, and our compliance team is always on hand to make sense of news if you’re not sure what to do with it.
Kate is a senior paraplanner at Verve with a Diploma in Financial Planning, Certificate in Mortgage Advice, advanced pension qualification and is working towards advanced diploma.
.png)