Child Trust Funds – Report Summary

Summary

Billions of pounds are sitting in the Child Trust Fund accounts of millions of young people currently aged 12 to 20. The value of unclaimed accounts is potentially over £1.7 billion, with a large part of it likely to have been forgotten about by everyone except the financial institutions profiting from it. A long time has elapsed since the Child Trust Fund scheme was set up and closed to new entrants and it is no longer a government priority. We heard from The Share Foundation on how Child Trust Funds can greatly help young people, particularly those from less wealthy backgrounds, but HM Revenue & Customs (HMRC) has failed to apply sufficient effort to getting the most from the government’s significant investment in the scheme.

The government put £2 billion into Child Trust Funds, which are tax-free savings accounts, for over 6 million children, with the laudable aims of giving all young people a pot of money when they reach 18, promoting financial literacy and teaching good savings habits. HMRC managed the setting up of the accounts well and transferred the funding to the scheme effectively. However, once the bulk of its administrative involvement ended in the early 2010s, it failed to plan for the long term. Several government departments have a role in making the scheme succeed, but HMRC has failed to coordinate efforts and has made no attempt to promote the scheme’s wider objectives. Consequently, much less has been achieved from the government’s £2 billion investment than could have been possible. HMRC has little corporate memory or evidence of real learning from the scheme and has no intention of re-evaluating its future.

According to the trade association representing the providers of Child Trust Funds, in Spring 2023, 42% of 18-to-20-year-olds—almost a million young adults—had not claimed their savings. While many may have chosen not to claim it yet, it is likely that many may not know about the accounts or have lost track of them. A high proportion of these accounts are likely to belong to young people from low-income backgrounds, those who need it most. Providers are experiencing difficulties contacting many account holders and HMRC is not doing enough to help them. Furthermore, the families of young adults without mental capacity are finding it costly and complicated to access their Child Trust Funds via the Court of Protection and its equivalents. Young people’s legal rights are paramount, but HMRC as advocate for the scheme has a responsibility to work with the Ministry of Justice and its equivalents in the home nations to find a less daunting process.