Hundreds of thousands of Brits sitting on tax free £2,000 without even realising it | Personal Finance | Finance

Grandparents and parents are being urged to double-check whether younger family members have claimed a pot of tax-free money worth an average of more than £2,000, as hundreds of thousands could be missing out.

The money is sitting in Child Trust Funds (CTFs), which were set up to give a financial headstart to children born between September 1, 2002 and January 1, 2011. Parents were sent a government-provided voucher or payment worth £250, rising to £500 for low-income families.

If they didn’t act, HMRC opened a CTF automatically on their behalf. Of the 6.3 million accounts created, 1.8 million were opened by HMRC. Many parents may never have known where their child’s nest egg ended up.

Sarah Coles, head of personal finance at AJ Bell, said CTFs were meant to build a nation of investors, but more than 750,000 worth more than £1.6 billion are sitting unclaimed. “It’s a crying shame, because they’re worth £2,200 on average.”

Many families may also have lost track of CTFs after moving house, failing to update their details or misplacing the paperwork.

The scheme was later replaced by the Junior ISA, which is also tax-free and allows families to save up to £9,000 a year for under-18s, but with no Government contribution.

The Government is setting up a new task force to reconnect young people with lost or forgotten CTFs.

Parents and young people can use the Government’s online “Find a Child Trust Fund” tool to locate an account. Once they know the provider, they can contact the company to access the money.

Coles added: “Some people will need the cash for emergencies immediately, but it’s worth keeping at least some of it invested.”

Families might also consider moving the money into a Junior ISA, which typically has lower charges and a broader choice of investments, or an adult ISA if over 18.