As Elle Middlemas approached her 18th birthday, she began wondering if she had a child trust fund, a government savings account given to all children born between 1 September 2002 and 2 January 2011, that can be accessed as soon as they officially hit adulthood.
She quickly hit a dead end. She wasn’t sure if she was even owed the money and could find no information online. An email to HMRC seeking clarity led her nowhere.
“No one had said anything and my mum passed away when I was 11, so I just didn’t have a clue,” said Middlemas, a college student in Whitby. “My sister is 21, she’d been looking for three years and couldn’t find anything, so we just assumed we didn’t have them. I was really upset because I saw all my friends had one.”
The sisters were two of approximately 758,000 people in the UK aged 18 to 23 with an unclaimed child trust fund (CTF). An estimated £1.5bn is still sat in bank accounts owed to young people, many from low-income backgrounds, who don’t know it exists.
There are growing calls for funds to be automatically released to account holders as soon as they turn 21, which experts believe would immediately put up to £286m straight into the pockets of young people who need it most.
For Elle, it wasn’t until she had a conversation with a friend’s parent six months after turning 18 that she found out she was definitely entitled to a CTF, even if a parent had never added money to it or even acknowledged it. She immediately renewed her search and found the Share Foundation, a charity which is helping reunite young people with their CTFs, and soon found the NatWest account with her name on it.
“I had £700 sitting in my bank and I was like, what is going on? How on earth have I got that?” she said. “My sister had one too, and for years she had no idea how to access to it at all.”
Elle is planning to go to university in September, and aims to either use the money to help fund her living costs, or will invest it. Her sister has used hers to pay off some debts. “We’re just so grateful. It will help us to get on in life,” she said. “Everyone who has one should be eligible to get it without having to go through the process I have.”
CTFs were introduced by the Labour government in 2005 to encourage parents to save for their child’s future. They were allocated to all children born in the UK between 1 September 2002 and 2 January 2011. Each child was given £250 from the government to launch the account, with an additional £250 added for those from low-income families or in the care of the local authority. The account holder would also receive any gains accumulated on their fund in the run-up to their 18th birthdays.
The idea was that parents would take control of the fund, and were able to add up to £9,000 a year.
If an account was not opened by a parent within 12 months of a child being born, HMRC opened one on their behalf. The initial government money was invested in the stock market, and the average value of a CTF is £2,200 today.
Now two-thirds of the more than 6 million recipients of CTFs are over 18 and entitled to access their money, with HMRC-allocated accounts amounting to 28% of all CTFs.
The north-east has the highest rate of HMRC-allocated accounts in England, with a total value of £48m. Across the UK, those from the 15% most disadvantaged families have accounts worth about £2,900 on average.
Gavin Oldham, chief executive of the Share Foundation, said the CTF scheme is falling short due to a lack of communication, inadequate financial education and sheer policy neglect. The charity is considering a judicial review to force the government to act on paying out unclaimed funds.
He said the charity has linked well more than 100,000 accounts to young adults “but the sheer quantum of these unclaimed accounts remains a major problem”.
“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 added.
The charity is pushing for HMRC-allocated accounts to be automatically released when holders turn 21. This would release about half a billion pounds, of which £350m would go to low-income young adults. They say it could be administered through channels such as benefits, payroll and student loan.
“We could embark on a lengthy legal process, and it would probably succeed, but this would set the whole timeline back, potentially for years,” Oldham said. “These young people can’t afford to be denied their birthright for so long.”
The Share Foundation is calling for a new scheme targeted specifically at young people from low-income backgrounds, with an embedded financial awareness programme that would allow young people to top up their fund through learning.
Laura Kyrke-Smith, Labour MP for Aylesbury, said the child trust fund scheme was “built on the right principle” but “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 the system was “confusing and opaque” and the government should do more to make it straightforward and transparent by “proactively tracing account holders and improving public information”.
An HMRC spokesperson said: “As well as directly sending every eligible young person information to help them find their child trust fund, we also regularly raise awareness through social media and broadcast interviews, and have launched an online tool to help people trace their accounts.
“Banks, building societies and investment firms managing the funds are also responsible for communicating with account holders.”