Thousands could be missing out on more than £2,000 in forgotten savings

HMRC is encouraging parents and young adults to check if they have unclaimed money saved in a Child Trust Fund. New figures reveal approximately 750,000 people aged 18-23 have not claimed money that has been saved into an affected account, which were initially opened by the government with a £250 voucher.

Child Trust Funds can be accessed once the holder turns 18, but many have not been claimed years later. With HMRC estimating the average fund is worth £2,242, this represents a significant amount of unclaimed cash.

Angela MacDonald, second permanent secretary and deputy chief executive of HMRC said: "If you’re between 18 and 23, you could be sitting on a savings payout and not even realise it."

How do Child Trust Funds work?

Child Trust Funds were introduced by Tony Blair's Labour government in 2005, but were closed to new applicants and replaced by Junior ISAs by the coalition government in 2011. This means only children born between 1st September 2002 and 2nd January 2011 could still have one.

The accounts served a similar purpose to the modern Junior ISA, designed to encourage adults to build a savings pot for a child who could then access the money once they turned 18. The major difference to a Junior ISA was that, as an incentive, the government of the day contributed £250 when the account was opened, plus £250 more if the child was from a low-income family or in local authority care. Parents or other adults could then add up to £9,000 per year to the fund over the course of the holder's childhood. Once the child reached 16, they could take control of the account, but not withdraw any money until they turned 18.

Like Junior ISAs, Child Trust Funds are tax-free and earn interest, which means even if only the government voucher was added, the account could have grown to a very useful sum over the years.

Why have so many people not claimed their Child Trust Funds?

The last Child Trust Fund was opened in 2011, so it is likely that many people are unaware they have one. Parents may have forgotten, not told their children about the accounts or not realised they had been set up.

It is also possible that many people do not realise how much the money they put in would have grown, even if nothing was added beyond the government voucher. The initial £250, the minimum amount a Child Trust Fund would start at, would more than double to over £500 after 18 years of 4% growth and compounding. This could be a very useful amount of money to a young adult, or the beginning of a new savings or investment account.

How can holders claim a Child Trust Fund?

It is relatively easy to claim a Child Trust Fund, but there are a few steps to follow. You should use the government's free search tool to find the provider of your Child Trust Fund – if you have one – unless you know the provider already. The tool will tell you if you are too old to have had a Child Trust Fund. Avoid any third parties that offer to track down the fund for you, as this will not be free and so a waste of money.

The search tool will ask for your date of birth and national insurance number, or those of the person you are searching on behalf of.

You may need to wait up to a few weeks to hear back, but once you have the details of your Child Trust Fund provider, you can contact them directly to withdraw your funds, or transfer the cash to a different savings or investment account.