A staggering £1.7 billion lies unclaimed in Child Trust Funds (CTFs), leaving nearly a million young adults without the financial boost they were entitled to receive.
According to a recent report by experts, 42% of eligible 18-20 year-olds have not accessed their savings due to a “failure in long-term planning” by HM Revenue and Customs (HMRC).
“Obstacles in Accessing Savings: Mental Capacity and Provider Profits Under Scrutiny”
CTFs were introduced as tax-free savings accounts for children born between 2002 and 2011, with the promise of providing at least £250 to each child when they turn 18. However, as the scheme matures, it has failed to deliver on its goal of empowering the next generation with a vital “financial jump start” to adulthood.
One significant hurdle preventing access to these funds is the lack of support for young people lacking mental capacity. The process of accessing CTFs can be costly and time-consuming, especially for those with disabilities, like 16-year-old Harry, who has Down Syndrome.
His mother has saved over £7,000 for him, but they’ve hit roadblocks, leaving Harry unable to access his rightful savings.
The issue goes beyond unawareness, with around half a million CTFs belonging to children from low-income families. This suggests that those who need the money the most are the ones missing out. The PAC (Public Accounts Committee) report urges HMRC to take more proactive measures in locating and contacting young people who have yet to claim their savings.
Compounding the problem, some CTF providers are earning massive profits, up to £100 million per year, from charging fees on dormant accounts. Shockingly, out of approximately 55 providers, only four have taken steps to link these forgotten accounts with their owners. This lack of action undermines the very essence of the CTF scheme, diverting funds away from their intended purpose.
“Addressing the Barriers: PAC’s Recommendations for Empowering the Next Generation”
To address these barriers, the PAC recommends better collaboration between HMRC and CTF providers. It’s crucial for HMRC to actively find eligible individuals who have not claimed their savings and provide the necessary support to ensure that these funds are accessed.
Additionally, implementing financial education in schools can empower young people with essential money management skills, ensuring they are better prepared to make informed decisions about their CTFs and other financial matters.
In conclusion, the £1.7 billion unclaimed in Child Trust Funds is a significant concern, leaving many young adults without the financial support they were promised. Swift action is needed to ensure that CTFs fulfil their intended purpose of providing a much-needed boost to the next generation’s future.
