Failures in long-term planning by the UK’s tax authority have left more than £1.7bn dormant in state-supported accounts aimed at boosting young people’s savings, according to a cross-party group of MPs.
The House of Commons public accounts committee said on Wednesday that HM Revenue & Customs had “failed to co-ordinate efforts” around Child Trust Funds. It urged the agency to increase efforts to pair the money with account holders who were contending with rising living costs.
About £2bn was invested by the government in CTFs across the lifespan of the scheme between 2002 and 2011. It benefited 6.3mn children in all. The value of unclaimed funds is at least £1.7bn, according to the MPs’ report, although this includes some money contributed by families.
The PAC found that many account holders were unlikely to “know about their savings” and many providers were “not doing enough to link up forgotten accounts with their owners”.
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 the tax-free wrappers that matured when a child turned 18.
The Share Foundation, a charity, estimated that 1mn — or 42 per cent of — eligible 18- to 20-year-olds had not claimed their account by spring of 2023. The average amount held in a CTF was £1,911 in April 2021, according to HMRC.
Dame Meg Hillier, Labour MP and committee chair, said: “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 CTFs are given the chance to be the boost to young people’s futures which they were designed to be.”
The PAC also raised concerns over the status of roughly 126,000 young people living with mental incapacity who needed to apply for a court order to gain access to their funds. It called on officials to cut bureaucracy and costs for this group.
The report comes after the National Audit Office, the public spending watchdog, found in March that, among parents who had received a voucher, those on lower incomes were less likely to set up a CTF and their children were more at risk of losing track of funds.
The MPs challenged HMRC’s decision to treat the policy as having ended in 2011 despite accounts maturing from 2020 onwards. They said this hampered accurate record-keeping and meant providers were left unmonitored.
The committee also urged HMRC to incentivise providers to match up accounts, warning that banks and building societies had failed to work with a tracing service while charging fees for basic services such as issuing statements.
HMRC said: “Every 16-year-old is sent information about finding their Child Trust Fund with their national insurance letter . . . We would encourage anyone unsure about their situation to get in touch with their bank or building society.”
The Investing and Saving Alliance, a trade body for providers, declined to comment.
Source: Economy - ft.com
