Two-thirds of teens unaware of Child Trust Fund windfall

Nearly two-thirds (62 per cent) of 16 and 17-year-olds do not know they are due to receive a lump sum from their Child Trust Funds or Junior ISAs when they turn 18, according to a survey conducted by Orbis Investments.  

The first ever Child Trust Fund (CTF) recipients begin turning 18 this month, with the scheme open to children born on or after 1 September 2002, but Orbis’ survey found many are not aware of the money coming to them.  

Just under half (44 per cent) of respondents are still unsure about what to do with the money. Nearly a quarter (23 per cent) of 16 and 17-year-olds surveyed said they will continue to save the money and a tenth (10 per cent) of those are intending on spending the money once they can access it. 

Just over one-in-ten (12 per cent) said they intend to save it, but will opt for a Cash ISA.  

However, with global equities having fared substantially better than cash over the long-term, Orbis Investments’ UK Director Dan Brocklebank says recipients might be better investing their unexpected windfall.  

Dan Brocklebank, UK Director, Orbis, says: “Our survey shows that the majority of teenagers have no idea about the money sitting waiting for them, and some parents may well have forgotten these funds exist. Now that those turning 18 are gaining access to their money it is important that they consider all their options including investing, or keeping their pot invested, in order to make the most of the contributions made on their behalf.” 

Since CTFs launched in 2002, the MSCI World Index has returned 9.18 per cent per annum whereas cash has returned just 2.08 per cent.  

The CTF was replaced by Junior ISA in November 2011 and many parents chose to transfer their CTF holdings to a Junior ISA once that option became available to them in 2015. 

Orbis has a unique Junior ISA offering: No fees will be charged, for the entire lifetime of the account, on any money you invest during the first 12 months. This includes money transferred from an existing Junior ISA or Child Trust Fund in the first year. 

Brocklebank says: “We want to make investing simple and easy for all because investing is the best way to for anyone to grow their savings and wealth over the long-term.  With investing, it really does pay to be patient and children have the advantage of an extremely long-term investment horizon. However, far too many Junior ISA accounts are held solely in cash. The Orbis Junior ISA is designed to be a simple way for parents to start to build a long-term nest egg for their children and, in the process, help them understand the power of compounding and develop good financial habits.”