Calls Mount for Automatic Release of £1.5bn in Unclaimed Child Trust Funds
Experts are advocating for the government to automatically release child trust funds when holders turn 21, a move that could immediately channel up to £286m into the pockets of young people who need it most. This comes as an estimated £1.5bn sits unclaimed in bank accounts, with many account holders unaware of their entitlements.
The Struggle to Access Funds
Elle Middlemas, a college student from Whitby, faced significant hurdles when trying to access her child trust fund. After her mother passed away when she was 11, she had no knowledge of the account. "No one had said anything, so I just didn't have a clue," she explained. Her sister, aged 21, had searched for three years without success, leading them to assume they had no funds. "I was really upset because I saw all my friends had one," Middlemas added.
It wasn't until six months after her 18th birthday, during a conversation with a friend's parent, that she learned she was entitled to a child trust fund, even if no contributions had been made by her family. With help from the Share Foundation, a charity assisting young people in reclaiming their funds, she discovered a NatWest account in her name containing £700. "I had £700 sitting in my bank and I was like, what is going on? How on earth have I got that?" she said. Her sister also found an account, which she used to pay off debts, while Middlemas plans to use hers for university living costs or investments.
Background and Current Issues
Introduced by Tony Blair's Labour government in 2005, child trust funds were designed to encourage parents to save for their children's futures. All children born in the UK between 1 September 2002 and 2 January 2011 received £250 from the government, with an additional £250 for those from low-income families or in local authority care. Parents could add up to £9,000 annually, and if no account was opened within 12 months of birth, HMRC established one automatically. Today, the average fund value is £2,200.
However, approximately 758,000 individuals aged 18 to 23 have unclaimed funds, totaling £1.5bn. Two-thirds of the over 6 million recipients are now over 18 and eligible to access their money, with HMRC-allocated accounts comprising 28% of all funds. The north-east of England has the highest rate of such accounts, valued at £48m, while those from the most disadvantaged families hold accounts averaging £2,900.
Charity and Political Responses
Gavin Oldham, chief executive of the Share Foundation, criticizes the scheme for "a lack of communication, inadequate financial education, and sheer policy neglect." The charity is considering a judicial review to compel government action and has already reconnected over 100,000 accounts. "It is strange to find a government which expresses such concern over the poverty of young people, but at the same time is doing so little to deliver on the groundbreaking scheme introduced by the previous Labour government," Oldham stated.
The foundation proposes automatically releasing HMRC-allocated accounts at age 21, which would unlock about half a billion pounds, including £350m for low-income young adults, through channels like benefits, payroll, and student loans. "These young people can't afford to be denied their birthright for so long," Oldham emphasized, warning that legal delays could set the process back years.
Laura Kyrke-Smith, Labour MP for Aylesbury, acknowledges the scheme's principles but notes its flaws. "Too many accounts have become difficult to trace or access, leaving money sitting unclaimed while young people who could benefit simply don't know it's theirs," she said. She calls for a more straightforward and transparent system, with proactive tracing of account holders and improved public information.
Government Stance
An HMRC spokesperson highlighted efforts to raise awareness, including direct communications to eligible individuals, social media campaigns, broadcast interviews, and an online tracing tool. "Banks, building societies and investment firms managing the funds are also responsible for communicating with account holders," the spokesperson added, underscoring shared responsibility in addressing the issue.
