Phillipson marks Child Trust Fund access for “Labour’s generation” and demands the Government ensures every young person can access their fund

This Tuesday, 1 September, people turning 18 will for the first time be able to access their Child Trust Fund accounts, the innovative government-funded savings scheme introduced by the last Labour Government and abolished by the Conservatives a decade ago.

Child Trust Funds were introduced so that every young person had access to savings and a financial springboard at the start of their adult life, so they had savings they could build on for later in life, or could put down a deposit on a flat, buy a car, start a business or whatever else they chose. Labour wanted to extend to every young person the options that wealthier families took for granted, with bigger initial payments for the children from the least well off backgrounds.

Until the Conservatives closed the scheme in January 2011, the Labour Government invested at least £250 in a fund that only the beneficiary can access, and only when they turn 18. The money went into an account their parents could open with a financial services provider, using a voucher sent out by the government – and for children whose parents didn’t use their voucher, the Government set up an account for them.

Parents and others could pay more money into the account too, subject to an annual cap. In Wales, the Welsh Labour Government put extra money in when children reached primary school age. Children with disabilities were entitled to extra annual payments into their Trust Fund from the Government, because of the extra needs young adults with disabilities face.

Around 55,000 children every month will come of age and benefit from the scheme, from now until January 2029, but only if they know about the scheme and know where their account is.

Bridget Phillipson MP, Labour’s Shadow Chief Secretary to the Treasury, said:

“A generation ago, a Labour government looked ahead to the future of today’s young adults. People turning 18 today and for years to come will be the beneficiaries of their foresight and Labour’s determination to make lives better and society fairer.

“The contrast with the mishandling of young people’s futures – on public health, on schools, on exams, on jobs – by the current government in Westminster could not be starker.

For every 18-year-old, this is the difference a Labour government makes in spreading power and opportunity in our society. Labour’s generation, the school-leavers for whose futures the last Labour government planned, meanwhile has been let down by a Tory government which doesn’t do its homework.”

Ends

Notes for Editors

1. Child Trust Funds cannot be accessed until a child turns 18, but there is no restriction on what the funds can be used for.
2. While all children born from September 2002 were to receive an endowment, it was paid at two levels. For most children the initial amount would be set at £250, but children from low-income families who also qualified for the full Child Tax Credit received a higher payment of £500.
3. Vouchers were issued to new parents to enable them to set up a Child Trust Fund with an authorized financial provider. If parents did not use the voucher, HMRC set up an account for them, so no child was left behind.
4. The scheme finally went live from April 2005, backdated for children born on or after 1 September 2002. The choice of 1 September was intended to ensure that as far as possible all the children in a given school year were either eligible or not eligible.
5. In 2006, Gordon Brown announced that there would be additional payments into CTF accounts at the age of seven. Like the initial amount, these would be broadly income related with all families receiving £250 per child and less well-off families receiving £500 per child.
6. The 2009 Budget also provided for yearly payments into the fund of £100 for children with a disability. Children with more severe disabilities received payments to their fund of £200 each year (Child Trust Funds (Amendment No. 2) Regulations 2010).
7. Arrangements in Wales, where between 2009 and 2011 the Welsh Labour government made extra payments, are explained here: https://www.bbc.co.uk/news/uk-wales-politics-11863829
8. The figure of 55,000 people turning 18 and with a Child Trust Fund per month is from HMRC: https://www.gov.uk/government/news/teenagers-to-get-access-to-child-trust-funds-for-first-time
9. The Conservative-led government which took office in May 2010 took less than a fortnight to announce that legislation would be introduced such that the scheme would be abolished. From August of that year government payments at birth would be reduced and payments at age seven would stop; from January 2011, all payments would stop.
10. Although the abolition was not immediate, takeup by parents of the scheme fell sharply, and in the final six months in which the scheme was in operation, less than a third of vouchers were actually converted into funds by parents(https://www.gov.uk/government/statistics/the-child-trust-fund-quarterly-statistics, August 2014 release).
11. According to HMRC, around 6 million children hold a CTF with an estimated value of “over £7.4 billion” in 2015-16(https://www.gov.uk/government/publications/child-trust-funds-and-junior-individual-savings-accounts-subscription-limit-changes-from-6-april-2020/child-trust-funds)
12. With the scheme effectively dormant for the best part of a decade, many children (and their parents) may be either unaware that their account exists, unsure how to access their account, or have lost the details of their account.
13. The consumer group Which? has estimated that this could apply to as many as 3 million children and young people for accounts containing as much as £2.5 billion (https://www.which.co.uk/news/2019/09/teenagers-urged-to-check-for-lost-child-trust-fund-savings/).
14. The government has now put in place some mechanisms for improving the visibility of these accounts (https://www.parliament.uk/business/publications/written-questions-answers-statements/written-question/Commons/2020-01-27/8358/)
    1. HMRC has improved the National Insurance Notification (NINO) letter, which is sent out prior to a child’s 16th birthday, to raise awareness of the CTF scheme;
    2. HMRC has worked with a charity, The Share Foundation, to develop a process whereby the charity can link children with their account;
    3. HMRC is developing a simplified system for account tracing which will assist those with a limited digital footprint.
    4. While CTF providers were already required to send regular statements to the contact for the account, they will in future also be required to send a statement in the year the child reaches 17 in anticipation of the maturity of the account.
15. If the figures from Which? are right, however, here are still likely to be tens or even hundreds of thousands of children in every year who have lost touch with their account, or in some cases don’t even know they have one.