Young people with lost Child Trust Fund accounts will soon be contacted by the Government in a bid to reunite them with their money, This is Money can reveal.

More than £1.5billion is sitting in as many as 750,000 forgotten CTFs owned by those aged between 15 and 24, the latest official data shows, with an average of £2,200 in each pot.

But HM Revenue and Customs is set to soon send letters to youngsters about their pots for the first-time ever in a push to slash the amount of unclaimed funds.

CTFs are tax-free accounts that were launched in 2005 by the then-government for children born between 1 September 2002 and 2 January 2011.

The accounts were deposited with £250 – or £500 for lower income families – to give everyone a lump sum to begin their adult life when they turned 18.

It was also designed to encourage young people to develop a savings habit that would endure throughout their life.

A child's parents could decide to put the money into a cash account where it would gain interest, or an investment account. They were able to make additional contributions up to an annual limit.

If parents did not open a CTF for their child, it was done by HM Revenue & Customs on the child's behalf.

The funds will now be a welcome boost to young people plagued with soaring house prices and stagnant wages, who can use the money to buy a car or for a house deposit, for example.

When the accounts mature, the fund converts into an adult account and no more money can be added.

But the well-intentioned scheme has fallen flat as swathes of young people haven’t claimed money from their matured accounts – and some don’t even know they have such a fund.

Families have forgotten about the saved sums over time or have lost track of the provider and account details. 

Some £2,200, on average, is languishing in these matured, forgotten accounts. The initial deposit has benefitted from compounded savings interest or investment growth in many cases, as well as additional payments from parents.

Savings providers and HMRC have been previously lambasted by the Public Accounts Committee for their failures surrounding the scheme.

A damning 2023 report from the PAC said there are many unclaimed accounts because of a 'failure in long-term planning' by HM Revenue and Customs.

It also claimed some CTF providers such as banks are not doing enough to proactively reunite owners with their forgotten accounts, while charging fees for passively managing the accounts.

But the droves of letters set to be delivered could reunite swathes of young people with their funds.

Anyone aged 21 who hasn’t yet claimed their money can expect to get a letter that tells them they have a CTF account and it will encourage them to access it.

Age 21 has been chosen as at this age most young people will have dealt with HM Revenue and Customs, so it will hold the most up-to-date contact details for them, the tax office believes.

The Government has already started to send letters to some young adults but the scheme will fully launch later this year.

However, you don’t need to wait until a letter from the taxman to access your money.

Children are permitted to take over management of the accounts when they turn 16 and can access the funds from age 18.

To find your CTF if you don't know the provider, first ask your parents if they have any details.

If they don't, you can use an official service. See www.gov.uk/child-trust-funds/find-a-child-trust-fund. You must be at least 16 years old and looking after your own CTF to use the service.

You'll need your National Insurance number on hand, too.

Once you have tracked yours down, you can choose what to do with it. You can withdraw it or transfer it to an adult Isa where it will retain its tax-free wrapper. Anything you transfer will not count towards your annual Isa allowance, which is £20,000 for over 18s.

If you have a CTF but are under the age of 18, you could choose to transfer it to a Junior Isa.

Third-party agents advertise services that offer to track down CTFs on your behalf. However, they charge either a flat fee or a percentage of the value of the account. Using such a service still requires you to hand over the same information – and takes the same length of time.

MP Lucy Rigby, Economic Secretary to the Treasury, says: ‘Hundreds of thousands of young people in this country don’t know they have a Child Trust Fund, let alone how to access it. Some will have a couple of thousand pounds sat there that would really help them as they begin adult life.

‘I’m determined that those who have CTFs are made aware they have this money.

‘Together, we will ensure funds from these Child Trust Funds can be accessed by young people to help give them the best start to adult life.’

Rigby hauled in top finance bosses at stockbrokers and bank’s earlier this week to a roundtable to probe what else the Government and savings industry can do to slash the number of unclaimed accounts.

Chief executives and top brass at savings providers such as Nationwide, HSBC and Sheffield Mutual Friendly Society attended.