Six million young people to get a savings windfall of thousands TODAY - and many don't even know it; There's currently [pounds sterling]10 billion being held in Child Trust Funds accounts - and the first part of the money is being released this month.
Millions of young people are set to gain access to thousands of pounds on Saturday as the first group of people in the Child Trust Fund generation turn 16.
Saturday 1 September marks the 16th birthday of the legacy savings fund, meaning that the children can start managing their accounts, and in two years' time, access the savings.
Savings firm OneFamily manages 27% of the child trust fund market and has 20,369 account holders that will turn 16 in September.
It said the average balance for children born in 2002 currently sits at [pounds sterling]2,175.
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Child trust funds were awarded to every child born between 1 September 2002 and 1 January 2011 under a policy initiated by Gordon Brown.
The scheme, set up by the government, gave parents a head start in saving for their child's future, as well as ensuring that every child arrived at adulthood with a nest egg, no matter what their background.
They were designed to give parents a head start saving for their child's future.
Parents, family, friends and even the child themselves could save money into their fund, from as little as [pounds sterling]10 a month to up to [pounds sterling]4,260 a year.
The government gave vouchers to over six million children, and for those turning 16 between now and end of July next year the majority would have got [pounds sterling]500.
If the child came from a low-income family, they would have received [pounds sterling]1,000. Younger account holders will have had an investment of between [pounds sterling]50 to [pounds sterling]500, depending on their age.
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Parents could invest with a child trust fund provider of their choice, and if they didn't invest the voucher, the government partnered with a number of providers to do so on their behalf, so even if parents did nothing, no-one would miss out.
When the Coalition Government stopped contributing in 2011, the accounts already open remained active, but increases to their value switched to a combination of market growth and family contributions.
These saving pots now have hundreds and even thousands in them.
Steve Ferrari managing director of Child Trust Funds at OneFamily, said: "In September alone, over 75,000 child trust fund children will turn 16, with the average amount held in an account with OneFamily of this group at [pounds sterling]2,175, these children can expect a healthy nest egg to put towards their future plans.
"This group of children turning 16 this month, and over the coming year, will have done particularly well, partly due to the strong investment returns of 108%, more than doubling their initial investment since they were set up, but in addition they are the group that got an additional voucher when they turned seven."
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The money saved in a child trust fund can't actually be accessed until the child turns 18 - but from 1 September, children turning 16 will be able to become the registered account holder for their savings pot.
To do this they will need to contact their provider, who in most cases will give them a form to fill in to make the change.
Once the account has been updated, the child will receive all communications about the fund and they will be able to access any online account management that comes with the account and watch their money grow.
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However, while a large number of fortunate teenagers already own their accounts, huge numbers don't know it.
Over one million accounts are lost to the young person to whom they belong, almost entirely following their accounts being opened by HM Revenue and Customs on their behalf, because parents or guardians had not done so within the first year of their birth.
There were 1.74 million accounts opened in this way, out of 6.14 million in total and, in the case of families in receipt of Child Tax Credit, virtually all accounts were opened by HMRC.
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For these most disadvantaged young people, that's 440,000 lost accounts now worth nearly [pounds sterling]0.75 billion, including over [pounds sterling]400 million from Government contributions, according to the Share Centre.
To track down a child trust fund parents can use theHMRC's dedicated page.Parents will need to provide both their own information as well as that of their child, and once it has been submitted they should receive the information on where the child's child trust fund is held within 15 days.
Child Trust Funds no longer exist however children born after January 2, 2011 can open aJunior ISA (JISA)instead -- although without the Government voucher to kick-start savings.
Families with existing Child Trust Funds can transfer the funds into a Junior ISA.
Because Child Trust Funds are no longer being opened,the market is uncompetitive and you can get better rates with a JISA.
Coventry Building Society pays 3.5% on its JISA, Nationwide 3.25% and Tesco Bank 3.15%. That's compared to the best CTF rate of 2.65% from Skipton Building Society.
Discover more about thebest ways to save for your child's future in our guide, here.
Saturday marks a big milestone for many young people
While you can't actually spend or withdraw the money until you reach 18, 16 means it's now legally yours
Credit: OJO Images RF
The next best offering after the scrapped Child Trust Fund is the Junior ISA
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|Publication:||Daily Mirror (London, England)|
|Date:||Sep 1, 2018|
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