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Nearly one million young adults are owed a share of a £1.7billion savings pot, a report by the Public Accounts Committee (PAC) has found.
The money is wrapped up in forgotten-about Child Trust Funds (CTF) and it’s estimated that the average value of unclaimed accounts is around £1,900 each.
CTFs are tax-free savings accounts, which were set up for all eligible children in the UK who were born between September 1, 2002, and January 2, 2011. The accounts can be accessed when a child reaches 18.
However, some 42 percent of 18 to 20-year-olds have not yet claimed the savings in their matured accounts, many of which are thought to be from low-income backgrounds and may need it most.
The PAC, which scrutinises Government spending, raised concerns that providers are not doing enough to link up forgotten accounts with their owners.
Dame Meg Hillier MP, chair of the committee, said: “The aims behind Child Trust Funds are laudable – for young people to come into a pot of money on reaching 18, with the promotion of financial literacy and good savings habits.
“But many young people are unaware that they have money waiting to be claimed. Schemes like these need careful planning so that they are not forgotten at the point when they mature.”
As many as 887,000 CTFs were for children from low-income families and MPs warn “it’s likely” that much of the unclaimed money may be owed to them.
They also said CTFs are also not “easily accessible” for the families and carers of children and young people “lacking mental capacity”.
While up to 126,000 of these young people must have a family or carer apply for legal authority to access and manage these funds on their behalf, the Court of Protection (covering England and Wales) approved only 15 such applications in 2021.
The report also found that while providers are charging fees for passively managing CTFs, only four providers, out of around 55 in total, have proactively and voluntarily worked with the Tracing Group, a commercial service for tracing the owners of dormant accounts.
This means providers could be collectively earning up to £100million per year through charges on CTFs.
Dame Meg Hillier said the inquiry heard a “world of difference” can be made to care leavers in particular, with Funds acting as a “jump-start” into adult life.
She added: “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.”
An HMRC spokesperson said: “Every 16-year-old is sent information about finding their Child Trust Fund with their National Insurance letter. We also regularly remind people how to check if they have an account.
“The banks and building societies managing the funds are also responsible for communicating with account holders. We would encourage anyone unsure about their situation to get in touch with their bank or building society as well.
“People can easily locate their Child Trust Fund accounts online by using the ‘Find my CTF’ page on GOV.UK.”
