Why is my Child Trust Fund so low?

If you've recently checked your Child Trust Fund and the value isn't what you expected, that's understandable. Account values can change over time, and it's important to know why.

The value of a Child Trust Fund can increase or decrease over time depending on a range of factors, including investment performance, fees, and whether any additional contributions have been made. In most cases, the amount you see reflects years of growth and market changes, not just a total of what's been paid in.

Different types of Child Trust Funds

Before getting into why your balance may have changed, it helps to know which type of Child Trust Fund you have. There are three main types, and they perform very differently.

Cash Child Trust Fund

In a Cash Child Trust Fund the money is held in a cash savings account rather than being invested in stocks and shares. It works in a similar way to a regular savings account, with interest added over time.

Stocks and Shares Child Trust Fund

A Stocks and Shares Child Trust Fund invests your money in the stock market. This means the value can rise, but it can also fall. The performance is tied to how the investments in the fund perform, which can vary depending on market conditions and other factors.

With-Profits Child Trust Fund

A With-Profits Child Trust Fund is like a mix between a Cash and Stocks and Shares CTF. The money is invested, but with some level of guarantee built in, the exact terms vary by provider, but this typically means you'll get back at least what has been paid in. If the fund performs well, bonuses may be added on top.

Checking if I have a Child Trust Fund

Around 6.3 million Child Trust Funds were opened between 2002 and 2011, with 758,000 matured Child Trust Fund accounts remaining unclaimed according to HMRC. With 28% opened automatically by the government, many young adults are unaware that they have one or where it might be.

You don't need to pay to find a Child Trust Fund. Here are the main ways to find yours:

• Check old paperwork - Your parents may still have letters or documents with the details of your CTF provider on. 
• Contact providers directly - If you have a good idea of who the provider might be, you can contact them directly with your details to ask.
• HMRC's online tracing tool - If you don't have any details available, then use the government's free tool. You'll need to be 16 or over, or be the parent or guardian of the child, and have the child's National Insurance number. Once you've submitted your details, HMRC will post out the details of your CTF provider. 
• The Share Foundation’s free tool - If you were in care as a child, the Share Foundation is a charity that specialises in helping you track down and access your Child Trust Fund, with more hands-on support available if needed.

Reasons my Child Trust Fund may be low

There are several reasons why your balance might be lower than expected, and it's often a combination of more than one. Here are some of the most common:

Account type

The type of account your fund was placed into affects how it grows. Cash accounts earn interest over time, while stocks and shares accounts are linked to market performance, which means the value can go up or down. 

The balance you see reflects how your specific account has performed over its lifetime.

Investment performance

If your fund is invested in the stock market, its value will change over time.  That's the nature of investing. Markets can go through periods of strong growth, but they can also decline, so if you've checked your balance during a dip in the market, it might be lower than you expected. 

High fees

Child Trust Fund providers charge fees to manage the account, which are usually taken directly from the fund. This means fees can quietly chip away at growth or even reduce your balance over time.

The government capped annual charges on stakeholder Child Trust Funds at 1.5%, but some non-stakeholder accounts may charge more. 

It's worth checking how much you're being charged, as fees vary between providers, and if yours seem high, it may be worth considering transferring to a provider with lower charges.

Additional contributions

The government initially contributed between £50 to £500 into each Child Trust Fund depending on family income and the child’s date of birth. There was potential for another top up at age 7, based on the family’s income, however this was scrapped in August 2010.

Family members could also add up to £9,000 per year (birthday to birthday) to build up the CTF. If no further contributions were made over the lifetime of the account, the only potential growth would be on the government's contribution. 

Later birth year

The Child Trust Fund scheme was closed to new applicants in January 2011, and children born closer to the end of the scheme received a smaller initial contribution than those at the start of the scheme.

Why do I have a different amount in my Child Trust Fund compared to other people my age?

The short answer is that everyone's account is different. The amount in your Child Trust Fund depends on things such as:

• The government contribution
• Family and friend contributions
• The type of account
• The provider managing the account  
• The fees on the account 

There's no guaranteed amount. Two people born in the same year could end up with very different balances depending on these factors.

What can I do with my Child Trust Fund?

Once you turn 16, you have more control over your Child Trust Fund than you might think.

Become the registered contact

Becoming the registered contact on your CTF account gives you more authority to manage and make decisions regarding your account.

Check the terms and conditions

Before making any changes, it's worth taking the time to read the terms and conditions of your account. This will help you understand exactly what type of account you have, what you're invested in, and whether any charges apply if you decide to transfer.

Transfer to a Junior ISA

You can transfer your Child Trust Fund into a Junior ISA. You can't hold both at the same time, but you can switch if you find a Junior ISA that suits your saving goals better.  

Unity Mutual's Junior ISA* is a stocks and shares account, meaning any money invested has the potential to grow over time. Our Equity Fund tracks the performance of over 600 UK companies, and while the value can go down as well as up, investing over the long term can give your money the potential to outperform cash savings products. 

*Capital at risk.

What should I do if my Child Trust Fund is low?

What you can do if your Child Trust Fund is lower than you expected will depend on whether you've turned 18 yet, and if not, how much time is left before you do.

For under 18s

• Start or increase contributions — it's never too late to top up. You can make a one-off lump sum payment or set up a regular direct debit to build the balance over time and maximise your CTF allowance.
• Review your CTF type — if the fund is in a Cash CTF, consider switching to a stocks and shares account (CTF or Junior ISA) that could offer better growth potential over the longer term, though this comes with more risk.
• Consider your fees — if charges are high, transferring to a lower-cost provider could make a difference over the remaining years. 

For over 18s

• Withdraw and invest elsewhere — if you feel your CTF hasn't performed well, you could withdraw the money and put it into an investment product that better suits your financial goals. 
• Transfer to an ISA — your CTF can be rolled directly into an adult ISA, giving you access to a wider range of products. Depending on your goals, a stocks and shares ISA could offer better growth potential, or a Lifetime ISA could help you save towards your first home.
• Consider your situation — it's worth understanding exactly where your money is invested in and considering your financial goals before making any decisions. If your Child Trust Fund is with Unity Mutual, why not book a call with one of our team to discuss your options, or visit our CTF portal to find out more information.

Whatever your situation, asking questions about your Child Trust Fund is a great first step towards understanding your finances and building good saving habits. Getting to grips with how your money is invested and your financial goals are the building blocks of sound financial planning.  

*Terms and conditions apply to all our products.