Child Trust Fund windfall wave worth £4.7 billion

One of the biggest shifts of financial fortune is underway for young adults in the UK

One of the biggest shifts of financial fortune is underway for young adults in the UK, as the first wave of Child Trust Funds (CTF) matures over the next two years. Based on HMRC data, we estimate this first windfall wave will collectively be worth approximately £4.7bn for 16 to 18 year olds in the UK.

While the value of some CTF accounts may be modest, others will be significant sums. BMO reminds families they are allowed to boost CTF accounts up to £18,000 over two years (based on the annual limit set by the Government of £9,000 per year from 6 April 202o). Even if the full limit is out of reach, small amounts could still make a difference, especially is the money is converted to an adult ISA at the age of 18 and continues to be invested for the long term.

All babies born between September 2002 and 2 January 2011 were eligible for a Child Trust Fund (CTF). From September 2018, the first wave of 16-year old account holders could take some degree of control of their CTF – guardianship but not full ownership. The guardianship phase lasts two-years until at 18 they can become the official owners and can decide how to spend of invest their money.

We’ve been contacting all CTF holders on their 16th birthday to explain their financial options as they approach a point at which they can take ownership of their windfall.

Ross Duncton, Managing Director, Head of Direct at BMO, said, “Just as millions of people hear from pension providers as they approach retirement, Child Trust Fund providers will be contacting older teens directly in the next two years. This ongoing process is just the start of a collective windfall – we estimate the first wave collectively equates to £4.7 billion between now and 2020. This is an incredible bonus, and it is a privilege for us to tell our young customers about it.”

“It’s wonderful to think what an impact the money could have on young futures, especially if they recognise the funds’ potential return if they invest it rather than stick to cash. Whether they are investing to study, travel, start a family, or buy a home, it’s an exciting prospect. We want to help young people fully understand their options at this stage.”

“When they hear from us, some people may decided they want to spend their money as soon as they can access it at 18, while others may decide to shift it to an adult ISA and keep it going for the long term without having to take excessive risk. The latter option can make sense for savers with medium to long term goals.”
“BMO is committed to helping young people understand personal finance, especially the benefit of investing in the long-term via the stock market versus simple cash investing. Actively supporting financial education programmes is one way we do this, as well as being as clear as possible when describing our products. For example, this year, we’ve simplified many product names to help everyone understand their option clearly.” 

Three tips to help 16-18 year olds make the most of their Child Trust Fund

  1. If you think you qualified for a Child Trust Fund, but don’t know where the account is, track it down by clicking here.
  2. List your money goals (perhaps you want to buy a car or study in the medium term, or travel and buy a home in the long term) and consider the costs and timeframes. Then talk through your goals and with the adult named as the ‘Registered Contact’ on your Child Trust Fund.
  3. Together, take time to understand the Child Trust Fund rules, to check how your money might grow if you switch it from a cash-only fund to a stocks and shares. Calculate how your money could grow if you save it or invest in by clicking here.


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