The £250 Child Trust Fund That Shrunk to Just £12

When Max Prince turned 18, he anticipated celebrating the maturation of the Child Trust Fund his parents had opened when he was born. Instead, he was shocked to discover that after years of fees, the fund was worth a mere £12.39.

Max is one of about six million children born between September 2002 and January 2011, each of whom received an initial £250 from the government to encourage savings. The scheme was designed to provide a long-term, tax-free pot of money that would appreciate by the time recipients turned 18.

However, Max’s fund, managed by Columbia Threadneedle, suffered a significant setback. The investment firm claimed it had notified Max’s parents about a £30 annual fee, but the letters went unopened due to the family moving homes. Consequently, the annual charges depleted almost all of the savings they had worked so hard to accumulate. Columbia Threadneedle stated, “This is not the outcome we want for any of our customers.”

Child Trust Funds were introduced by then-Chancellor Gordon Brown, with strict guidelines on fees. Initially, most children received £250, with additional amounts allocated to those from lower-income families. However, in 2010, the coalition government reduced this amount to £50.

As children began turning 18, the first of these funds matured, prompting anticipation among families. Max expressed his family’s excitement: “We’d been expecting this letter for a while—waiting for it for 18 years.” However, their excitement quickly turned to dismay upon opening the letter revealing the paltry balance of £12.39. “It was certainly shocking, to say the least, and it’s kind of outrageous,” he remarked.

Statements reviewed by the BBC indicated that the fund had been worth just over £300 by 2012. However, beginning in 2013, Max’s account was subjected to a £30 annual administration charge, a fee his parents were unaware of. Although the maximum allowable fee for Child Trust Funds was set at 1.5%, calculations show that Max effectively faced charges exceeding 10% each year.

Initially managed by F&C Investments, the fund eventually transitioned to Columbia Threadneedle through a series of industry consolidations. The firm explained to the BBC that the account chosen by Max’s parents was a CTF Shares account, which employs a different fee structure. The £25 plus VAT charge was specifically for account administration, not the underlying investments.

Despite their forwarding system, Max’s parents stated they did not receive any communications about the charges. They were aware of the fund and its maturation but did not expect to be contacted beforehand. Columbia Threadneedle maintained that customers must make their own investment decisions, and without communication from them, the firm could not act on their behalf. The family plans to formally complain about this explanation.

Max expressed his disappointment: “The money was originally intended by Gordon Brown to help future adults get ahead in life. It’s unfair, and you could even say cruel. It’s unexplainable, I think, would be the best way to put it.”

Many Child Trust Funds remain unclaimed, with the average fund value now estimated to be around £2,000, thanks to growth and additional contributions from family and friends. Unfortunately, many young adults are unaware of these funds and the potential financial support they represent.

Gavin Oldham, an investment expert and head of a government-backed organization aimed at locating lost Child Trust Funds, called Max’s situation “fairly shocking.” He emphasized that the investment firm had the discretion to waive the £25 annual fee and could reimburse all charges, including compensation. “The next step for that family is to talk to the Financial Ombudsman Service, which would likely take a dim view of this,” he advised.

Columbia Threadneedle acknowledged the issue, stating, “As we assess our Child Trust Funds, we will focus on identifying similar situations and what action we can take.”

Max’s story serves as a cautionary tale about the importance of understanding the terms and conditions of financial products and the potential pitfalls of administration fees, which can significantly erode savings meant to provide a financial foundation for young adults.