Analysing the Child Trust Fund scheme on its 16th Birthday, and addressing its opportunities and challenges
On 1st September 2018, as the oldest Child Trust Fund recipient reaches 16 years of age, a period of 11 years will start during which over six million young people throughout the United Kingdom could benefit substantially. These fortunate teenagers already own their accounts, although huge numbers don’t know it. It is one of the biggest opportunities, and challenges, in the field of personal finance today.
The Child Trust Fund was the centrepiece of Gordon Brown’s plan to encourage asset-based welfare. His objective was to establish a savings habit among children, providing a cushion of financial assets as they embark on adult life and enabling them to be confident in the management of their finances. The scheme was designed to be both universal and progressive.
It was a hugely ambitious plan as a result of which over six million young people now own these largely Government-funded accounts. When the Coalition Government stopped contributing in 2011, the accounts already open remained active, but thenceforth increases in their value resulted from a combination of market growth and, for the lucky few, family contributions.
Our table provides a current analysis of Child Trust Fund in three key demographic segments: the wealthy, the middle and the poor. There is additionally the scheme we administer for looked-after children: our reconciliation status report shows the good progress this is making. However the numbers are small in comparison to the overall scheme shown in the table.
The opportunity remains, to achieve Gordon Brown’s original aims. For over five million young people the best way to do this is for them to take responsibility for their account – as they are allowed to do - for the two years before they can access their money (at 18), and to learn financial awareness first hand. Will parents and guardians enable them to do this, and will schools encourage it?
However there’s a challenge too. This is to re-link the huge numbers of ‘Addressee Gone Away’ - lost - Child Trust Funds. Over one million accounts are lost to the young person to whom they belong, almost entirely following their accounts being opened by HM Revenue and Customs on their behalf, because parents/guardians had not done so within the first year of their birth. There were 1.74 million accounts opened in this way, out of 6.14 million in total and, in the case of families in receipt of Child Tax Credit, virtually all accounts were opened by HMRC. What solutions can we put in place so that these young people do not continue to lose out?
However it is a fact that little attention was given by successive Governments to embedding these accounts with the families once they had been opened and, because they did not take ownership, c. 34% of all HMRC-allocated accounts - nearly 37% for the most disadvantaged families in receipt of Child Tax Credit - are ‘Addressee Gone Away’. For these most disadvantaged young people that’s c. 440,000 lost accounts now worth nearly £0.75 billion, including over £400 million from Government contributions. Following its success in reconciling the scheme for looked-after children, The Share Foundation has put forward a proposal to Government to address this specific area which it hopes will receive attention in the November budget.
The Share Foundation's Chair of Trustees, Gavin Oldham, is determined to ensure that the Child Trust fund not only delivers its opportunity for financial capability, but that it also does so across all young people - including the most disadvantaged.
“After a decade of relative neglect, the years ahead are vital for achieving the original purpose of the Child Trust Fund, which affects so many young people across the United Kingdom. I am determined to ensure that, working with my colleagues in The Share Centre and The Share Foundation and beyond, the scheme does indeed make a significant contribution to breaking the cycle of deprivation in the United Kingdom, and to helping all young people to develop their potential in adult life”.
Contact: Gavin Oldham OBE – 07767-337696
Notes for editors: The Share Foundation, www.sharefound.org , administers the Child Trust Fund and Junior ISA schemes for looked-after children and young people on behalf of the Department for Education. It was founded in 2005 as a registered charity. Its trustees include Ruth Kelly, former Treasury minister and Secretary of State for Education who will be speaking at a 16th Birthday party for the Child Trust Fund at the House of Commons on 6/9/18.