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A cross-party group of MPs has revealed that failures in the long-term planning of the UK tax authority have resulted in over £1.7 billion lying unused in state-supported accounts meant to boost the savings of young people. The House of Commons public accounts committee criticized HM Revenue & Customs on Wednesday for their lack of coordination regarding Child Trust Funds, urging the agency to take action to connect the funds with account holders who face rising living costs.
The government invested about £2 billion in Child Trust Funds between 2002 and 2011, benefiting 6.3 million children in total. According to the MPs’ report, at least £1.7 billion of these funds remain unclaimed, although some of the money was contributed by families. The committee found that many account holders are unaware of their savings, and providers are not making sufficient efforts to reunite forgotten accounts with their owners.
Under the Child Trust Fund scheme, parents of eligible children born between September 2002 and January 2011 received £250 in vouchers from the UK government to open an account for them. Lower-income families received £500, and households were encouraged to contribute to tax-free wrappers that matured when the child turned 18.
A charity called the Share Foundation estimated that by spring 2023, 1 million, or 42% of eligible 18 to 20-year-olds, had not claimed their account. The average amount in a Child Trust Fund as of April 2021 was £1,911, according to HMRC.
Dame Meg Hillier, the chair of the committee, stated, “In an ongoing cost of living crisis, our young people need every bit of support we can give them. HMRC still has time to make sure that Child Trust Funds fulfill their intended purpose of boosting young people’s futures.”
The committee also expressed concerns about approximately 126,000 young people with mental incapacity who need to apply for a court order to access their funds. They urged officials to reduce bureaucracy and costs for this group.
A report from the National Audit Office in March revealed that parents on lower incomes who received a voucher were less likely to set up a Child Trust Fund, putting their children at greater risk of losing track of the funds. The committee criticized HMRC for considering the policy to have ended in 2011, despite accounts maturing from 2020 onwards. This led to inaccurate record-keeping and insufficient monitoring of providers.
The committee also called on HMRC to incentivize providers to match up accounts and criticized banks and building societies for not cooperating with the tracing service while charging fees for basic services like issuing statements. HMRC responded by stating that every 16-year-old is sent information on how to find their Child Trust Fund along with their national insurance letter, and encouraged those unsure about their situation to contact their bank or building society.
The Investing and Saving Alliance, a trade body for providers, declined to comment.
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