Comment w/c 8th May

“.. for giving prudence to those who are simple, knowledge and discretion to the young – let the wise listen and add to their learning ..” 

Proverbs 1:4-5

If you have children or grandchildren in the United Kingdom aged between 7 and 15, do you – or they – know where their Child Trust Fund is? They definitely have one, but one in six is lost. The sad fact is that the more disadvantaged the family, the higher the rate of accounts gone missing.

This poster draws attention to the one million accounts valued at £1 billion which need to be claimed by their rightful owners, and it’s being circulated by The Share Foundation and The Share Centre to all 7,000 secondary schools in the United Kingdom.

Gordon Brown’s time as Chancellor may have ended in the financial crash but, notwithstanding its universal roots, his Child Trust Fund (CTF) is giving us now an opportunity to target real help where it’s needed – and, in doing so, to sort out the muddle of one million lost accounts.

Every child born in the United Kingdom between 1^st September 2002 and 2^nd January 2011 has a CTF account, even if they don’t yet know it. If the child’s parents/guardian had not drawn down the initial payment from Government by opening the account within the first year of birth, HM Revenue & Customs did it for them: with £250 generally, but with £500 if the family was in receipt of Child Tax Credit. These Government payments into the account were then repeated at the age of six.

Over six million CTFs were opened over these 8 years, compared with just c. one million of their successor account, the Junior ISA, over the following 7 years (the Junior ISA is only opened if the parent/guardian elects to do so, with their own money). These fortunate CTF young recipients are now aged between 7 and 15, so they are reaching the age at which they should be aware of their money; the oldest will be adults in just over 2 years.

However, the tragedy is that one million of these CTF accounts (16% of those opened) are ‘Addressee Gone Away’: they are lost to the child concerned. Even worse - the more disadvantaged the child, the higher the rate of lost accounts:

Because the concept of a savings or investment account is unknown to those who rely on state support for day-to-day existence, almost all the CTF accounts for the most disadvantaged were allocated by HM Revenue & Customs: so a sense of ownership was never established. Their accounts were allocated to one of fourteen account providers, who have looked after them carefully ever since but, notwithstanding their efforts, have been unable to make contact over the years.

So now, at least seven years after these accounts were opened, they remain ‘Addressee Gone Away’ - the money is safe and secure, but the young person and their parents/guardian are unaware of its existence. If they are still lost after age 18, they will become ‘dormant assets’, at risk of being put to other uses as time goes by.

With adulthood now approaching fast, it’s time for a concerted effort to make these connections. So the Share enterprises - that is, The Share Foundation and The Share Centre - are working hard in a variety of ways to re-link these young people with their money.

1. Looked-After children and young people: until October 2017, the Official Solicitor administered the scheme. Little was done over these years to keep the accounts reconciled and, when the scheme was transferred to The Share Foundation (which has administered the Junior ISA scheme for children in care since 2012), the initial match rate discovered - between local authority expectations of entitlement and accounts transferred - was less than 25%. A focused work programme is now underway throughout the United Kingdom between The Share Foundation, Local Authorities and HM Revenue & Customs to bring the scheme under control, and the match rate has already risen to 33%: still a long way to go, but making good progress. Click here for the latest status report.

2. Via secondary schools: our ‘Claim your CTF’ poster is being sent over the next week to over 7,000 secondary schools throughout the United Kingdom, in conjunction with TISA, the ‘Tax-Incentivised Savings Association’. The initiative is being financed jointly by The Share Centre, which also runs the Shares4Schools investment competition for year 12 students, and The Share Foundation. The poster link goes initially to an explanatory page describing the search process, then links onto HM Revenue & Customs’ ‘Find my CTF’ facility via the Government Gateway. The initiative will be backed up by social media and press coverage, and we are determined to re-link very large numbers of young people with their accounts via this publicity.

3. Young people in Child Tax Credit families: it is this demographic segment where the greatest challenge lies. There are estimated to be 400,000 accounts lost out of the one million total, with an average value of £1,500. That’s £600 million total value missing for the poorest 17% of the population, suffering a loss rate of one in every three accounts.

However, it is this segment where the greatest opportunity lies. The Share Foundation is therefore putting forward a proposal to Government for ‘Incentivised Learning’ for 15 to 17 year-olds, similar to its Stepladder Plus for young people in care. It is intended that in this case the life skill steps will include a new Financial Education GCSE, which we’re negotiating with the main examination authorities, and the incentive awards could be up to £10,000 per young person: paid into their Child Trust Fund, which will be found as part of the programme if missing.

The programme will bring real hope and opportunity to the most disadvantaged young people. Clearly it will need coordination across Government departments, including HM Treasury, the Department for Education, the Department for Work and Pensions, and possibly the Home Office: but, if confirmed during 2018, it should enable over a quarter of a million disadvantaged young people to benefit over the next four years - and it will resolve the worst area of muddle in the Child Trust Fund scheme.

Breaking the cycle of inter-generational deprivation is a worthy aim, first articulated by Sir Keith Joseph in the 1970s. It’s best tackled by targeting support where it’s needed, not by schemes of universality, such as those still being proposed by IPPR and the Resolution Foundation. So the Child Trust Fund scheme was not the best way to tackle it.

Nevertheless the CTF is with us: the accounts are set up and the money is safe and secure even though, in so many cases, their young owners don’t know about it. So we plan to save this brainchild of Gordon Brown from the muddle it’s got into, and go further than he intended: by using it to bring hope, opportunity and financial capability, to those who need it most.

It’s a key part of egalitarian capitalism.

Gavin Oldham

Share Radio