National Audit Office report on Investigation into Child Trust Funds

Hundreds of millions of pounds in Child Trust Funds (CTFs) set up by the government between 2005 and 2011 to help young people financially at the start of their adult lives has not yet been claimed, according to the National Audit Office (NAO). 

A CTF is a long-term tax-free savings account for children born between 1 September 2002 and 2 January 2011, which they can access when they turn 18. The government paid more than £2 billion into CTFs for 6.3 million children born during this period. Most children received around £250 each from the government at the time their CTF was started, while those from low-income families or in local authority care received an additional £250. 

Most CTFs were invested in stocks and shares, with the total market value of CTFs standing at £10.5 billion at April 2021, an average of £1,911 per CTF. Of the £10.5 billion, £0.8 billion belonged to young people aged 18 or over who could claim their CTF. Of the £0.8 billion, an NAO investigation found that 145,000 18-year-olds had not claimed a total of £394 million by April 2021, while 175,000 18-year-olds had either withdrawn or reinvested a total of £376 million from their CTF accounts. 

The NAO found that CTFs are at risk of becoming forgotten or lost track of by the account holder. As more young people with a CTF turn 18, an increasing number can access their accounts. However, latest estimates indicate that more than a quarter of CTFs have remained untouched for a year or more after their owners turned 18. 

It is unclear how many children and young adults are either unaware of, or unable to locate, their CTF. A 2019 YouGov survey of parents of children aged 8 to 16 revealed that one in six parents were unaware of the CTF scheme. HMRC set up 1.7 million CTFs - 28% of all accounts - after parents did not do so within the required 12-month time period using vouchers sent to them by HMRC, meaning the child's family had little engagement with the scheme from the outset. Children from low-income families were more likely to have their CTFs set up by HMRC than children from wealthier families^1. 

In 2019, HMRC began to alert 15-year-olds to the possibility that they could have a CTF account in the National Insurance number notification letter it sends to children as they approach the age of 16. This was followed by publicity in 2020, when the first children with CTFs began to turn 18. HMRC intends to incorporate CTFs into a communications campaign in 2023. 

The NAO estimates that CTF providers - including banks and building societies - could be earning collectively up to £100 million per year through charges on accounts.² There are currently 55 providers, down from 74 in 2011, meaning that some CTFs will have changed hands. 

HMRC data on CTFs from the period 2012 to 2020 is incomplete. HMRC began publishing statistics again in 2021 as the first tranche of eligible children reached the age of 18. New data about the number of unclaimed CTF accounts will be published in June this year, which will present data up to April 2022. 

Gareth Davies, the head of the NAO said: 

"At a time of economic hardship for millions of people across the country it is important the government does enough to make sure young people are aware of, and can access, their Child Trust Funds.

"HMRC should also seek to re-evaluate Child Trust Funds to understand the impact the scheme has had on savings for young people, including those from low-income families." 

-  ENDS - 

Notes for Editors   

1. 51% (887,000) of accounts set up by HMRC were for children from low-income families. 

2. Most CTFs are ‘stakeholder' CTFs, a type of account in which the funds are invested in stocks and shares and there are conditions on the account to protect the account holder. CTF providers' charges on stakeholder CTF accounts were capped at 1.5% of the CTF's value per year and the market value of stakeholder CTFs (where the account holder was less than 18 years old) was £7.4 billion in April 2021. The NAO estimates that if all providers had charged 1.5% of the accounts' market value, these CTF holders would have paid around £100 million to providers in the year to April 2021.