Around half a billion pounds hidden in child trust funds could be unlocked immediately, experts have claimed, as the government is urged to do more to reunite young people with their money.
The funds are long-term, tax-free savings set up for every child born between 1 September 2002 and 2 January 2011. The government deposited £250 in each, with those in low-income families or in local authority care receiving an additional £250.
Young people can take control of this account at 16 and withdraw funds when they turn 18. With interest, most grow to be worth much more than when they were set up.
Two-thirds of the six millions recipients of child trust funds are now over 18, meaning they should be able to access their accounts. However, an estimated 750,000 young adults are yet to claim their fund, HMRC data recently revealed, with £1.5bn still sitting in accounts.
The Share Foundation, a charity which helps link people with their child trust funds, has now called on the government to help reunite people with their funds through an ‘automatic release’ mechanism.
This would see the funds automatically given to account holders when they turn 21, a move which the Foundation says would give up to £286 million to young people immediately.
The proposal focuses on HMRC-allocated accounts, which account for 28 per cent of all funds that were opened (1.7m).
Overall, the scheme would release £553 million, the foundation finds, with £369 million of this going to low-income young adults.
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
ADVERTISEMENT
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
ADVERTISEMENT
Child trust funds have now been replaced with junior individual savings accounts (ISAs) which are long-term, tax-free savings accounts for children. These accounts work similarly, except the government does not give any money when they are set up.
Gavin Oldham, chief executive of the Share Foundation, said there is a lack of communication over the scheme and too little awareness, accusing the government of “policy procrastination”.
“It is strange to find a Government which, while it expresses such concern over the poverty of young people, at the same time is doing so little to deliver on the ground-breaking Child Trust Fund scheme introduced by the previous Labour Government,” he added.
The charity boss adds that the Share Foundation – which has reunited over 100,000 people with their child trust funds – is considering a judicial review to force the government to act on the issue of unclaimed funds.
An HMRC spokesperson said: “As well as directly sending every eligible young person information to help them find their Child Trust Fund, we also regularly raise awareness through social media and broadcast interviews – and have launched an online tool to help people trace their accounts.
“Banks, building societies and investment firms managing the funds are also responsible for communicating with account holders.”
Official guidance from the tax authority says that the most common reasons for lost child trust funds are that the claimants or their guardians have lost track of it or forgot it was set up.
It adds that every young person receives a National Insurance Notification before their 16th birthday, which includes information about how child trust funds can be located.
The department advises against using third-party agents who offer to find child trust funds at a price. In extreme cases, they have been known to charge £350 or even 25 per cent of the value of the account for this.
Instead, the tax authority advises young people either search ‘find your child trust fund’ on Gov.uk or use the free, approved tool from The Share Foundation, which requires just a few details. It is then easy to claim and access the account.