Pressure on UK government to automatically release child trust funds at 21
Nearly half a billion pounds stashed in children’s trust funds could be unsealed immediately, experts have claimed, as the government is called on to do more to reunite young people with their money.
The funds are long-term, tax-free savings created for each child born between September 1, 2002 and January 2, 2011. The government invested £250 each; those in low-income families or local authority care received an additional £250.
Young people can take control of this account at the age of 16 and withdraw money when they turn 18. With interest, many become much more valuable than when they were founded.
Two-thirds of the six million children’s trust fund recipients are now over 18, meaning they need to be able to access their accounts. But an estimated 750,000 young adults have yet to claim their funds, with £1.5bn still sitting in accounts, according to recently revealed HMRC data.
The Share Foundation, a charity that helps connect people with their children’s trust funds, has now called on the government to help reunite people with their funds through an ‘automatic release’ mechanism.
This will see funds automatically released to account holders when they turn 21, with the Foundation saying up to £286 million in immediate grants to young people.
The proposal focuses on HMRC-allocated accounts, which account for 28 per cent (1.7 million) of all funds opened.
The foundation found that overall the scheme would free up £553 million, of which £369 million would go to low-income young adults.
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Child trust funds have now been replaced by small individual savings accounts (ISAs), which are long-term, tax-free savings accounts for children. These accounts work similarly, the only difference is that the government does not issue any money when they are established.
Gavin Oldham, chief executive of the Share Foundation, accused the government of “policy delay”, saying there was a lack of communication and little awareness of the project.
“It is strange to find a Government that has expressed so much concern about youth poverty and yet has done so little to deliver on the groundbreaking Children’s Trust Fund program introduced by the previous Labor Government,” he added.
The charity boss adds that the Share Trust, which has reunited more than 100,000 people with children’s trust funds, is considering a judicial review to force the government to take action on unclaimed funds.
An HMRC spokesman said: “As well as sending details directly to each eligible young person to help them find the Children’s Trust Fund, we regularly raise awareness through social media and broadcast interviews and have launched an online tool to help people follow their accounts.
“Banks, building societies and investment firms that manage the funds are also responsible for communicating with account holders.”
The tax office’s official guidance says the most common reasons why child trust funds go missing is because claimants or their guardians lose track of them or forget they were set up.
It adds that every young person receives a National Insurance Notice before their 16th birthday, which includes information on how to find child trust funds.
The Department advises against the use of third-party agencies that offer to find child trust funds at a certain price. In extreme cases, they have been known to charge £350 for this, or even 25 per cent of the account value.
Instead, the tax office advises young people to search ‘find your child’s trust fund’ on Gov.uk or use The Share Foundation’s free, approved tool, which requires just a few details. It is then easy to claim and access the account.
