John Ashworth MP, Shadow Secretary of State for Work and Pensions: “For what reason the Government has not planned to commission additional data collection to enable an evaluation of the Child Trust Fund scheme?”
Andrew Griffith MP, Economic Secretary HM Treasury: “The scheme has been closed to new entrants for over 12 years. In this time HMRC has been focusing resources on evaluating and improving existing schemes. We will continue to keep the need to evaluate old schemes under review.”
Parliamentary Q&A, March/April 2023
Imagine you're a farmer, and in the autumn you plant your crop to be ready for harvesting the following summer. And let's say that, during the year, you have to give way to someone else to run your farm: but of course your crop remains still growing as planned.
The new owners, however, regard the crop you planted as an ‘old scheme’ — they’re content just to let the harvest go to waste.
Now look at the parliamentary question and answer in the quote above in respect of Child Trust Funds. Its ‘crop’ is ready for harvesting: but over 900,000 young adults with accounts worth over £1.7 billion in total are unaware of their good fortune — it's lost money, so far as they’re aware.
Those unclaimed accounts belong predominantly to low-income young adults from disadvantaged backgrounds. If you're familiar with the BBC’s ‘Children in Need’ appeal which raised over £35 million ‘on the night’, it would take half a century — 50 years — of those appeals to raise the same amount as is currently being denied to these young adults: money which is sitting in accounts in their own individual names.
The Government’s lacklustre approach, as shown in the quotation above, has stirred the interest of the National Audit Office and the Public Accounts Committee. Last Thursday The Share Foundation, represented by myself and Anthony Walker, Director of Operations, joined HMRC Chief Executive Jim Harra and his colleague Emily Antcliffe to provide answers to searching questions from the Public Accounts Committee: the full proceedings can be watched on YouTube or heard on our twin episodes of this week’s Financial Outlook (please see podcast library).
We know what needs to be done in order to resolve the situation — it's not too late. It's not only essential for the sake of so many young people, but we also need to prove how effective inter-generational rebalancing can be in empowering young people to achieve their potential in adult life.
Child Trust Funds are individual accounts administered by a range of account providers. Almost all young people born in the United Kingdom between September 2002 and the beginning of January 2011 were eligible to receive one of these government-funded accounts and, if their parents failed to redeem the voucher by their first birthday, HM Revenue and Customs automatically opened an account in their name with one of 14 ‘Revenue-Allocated’ account providers. Out of the 6.1 million children who received accounts over these years, over 1.7 million were ‘Revenue-Allocated’: 51% of which were established for children from low-income families (who comprise c. 17% of the UK population).
Analysis undertaken in 2018 at The Share Centre, one of the ‘Revenue-Allocated’ account providers, showed that 86% of these accounts were either ‘addressee gone away’ or had never been registered with the family concerned.
We're now at the stage when 36% of all issued Child Trust Funds (2.2 million) have become redeemable as their owners are now adult, but 42% are not claiming their money — and these principally comprise those low-income Revenue-Allocated account holders, who are also under the greatest pressure from the current pressure on their cost of living.
What's the problem?
Firstly, that the Government Gateway is not an effective search tool for these young people. The information it provides is two decades out of date, showing where the account was originally opened. However, over the years there have been many mergers and book sales of account providers, and further enquiries often result in a dead end. Also, the Government Gateway itself is hard for young adults to access.
In contrast, The Share Foundation’s search facility, https://findCTF.sharefound.org , links directly into currently-held records for 60% of all searches. So, what's needed is for HMRC to embrace this search facility as its formal partner for use by young adults, which The Share Foundation will operate without charge, either to Government or to the young people themselves.
Secondly, the Financial Conduct Authority must take a firmer line with those account providers who are sitting on large numbers of unclaimed accounts but are not yet connecting with the CTF register which enables accounts to be found so quickly. The National Audit Office estimates the total annual fee income on CTFs is c. £100 million, and there are few costs to bear if there is no valid address for the account owner. It is unacceptable to administer dormant accounts passively while most fee revenue accrues to the bottom line.
The Child Trust Fund is a world-leading programme for inter-generational rebalancing, but its harvest must not go to waste. It's a typical example of the need for more focus on the long-term within Government, as we called for on 9th May, and for service provision and communication to be maintained at a consistently high level throughout the duration of the scheme.
We hope starter capital accounts will continue to be provided on a targeted basis in the future, not just for young people in care but for all those from low-income families, fuelled by a percentage of inheritance tax receipts. But, as with that farmer’s crop in the field, these accounts must not only be planted and grown in value throughout the years of childhood and adolescence, but they must also be harvested when that time is due. They must not be allowed to waste into dormancy.
Gavin Oldham OBE
Share Radio