Billions of pounds are currently sitting in the child trust funds (CTFs) of millions of young people aged 12 to 20, the Public Accounts Committee has claimed.

The report by the Government body has stated that £1.7bn are sitting in CTF accounts, with a large part of this figure being forgotten about by everyone except for the financial institutions that are profiting from it.

The report found that 42% of young people aged 18-20, which totals nearly one million young adults, have not claimed the money in these matured CTF accounts, with many thought not to know they exist or have forgotten about them.

The CTF scheme was launched in 2005, backdating to include all children born since September 2002 and announced its closure to entrants in 2010. Over six million accounts were set up, into which the Government paid £2bn, with 72% of accounts set up by parents and guardians using a voucher sent to them by HM Revenue and Customs (HMRC). HMRC setup the remaining accounts on child’s behalf when their parents of guardians did not do so a year after the voucher being sent.

As of April 2021, the total value of all CTFs were £10.5bn, which averages a total of £1,911 per account.

Head of personal finance at Hargreaves Landsdown, Sarah Coles, said: “The Public Accounts Committee says there could be £1.7bn in unclaimed CTFs, failing young adults in dire straits. Those on lower incomes and those whose parents weren’t financially engaged when they received their voucher – so never knew where it was invested – are the most likely to be completely in the dark. They’re also more likely to need it most. It says some providers and the Government need to do more to reunite parents and children with their accounts.

“A Commons Committee in May heard that part of the problem was the ‘lost years’, from when the scheme closed to new entrants in 2011 to when they started maturing in 2018/19. HMRC says CTFs fell down the priority list, so they didn’t keep a close eye on providers. In the meantime, those providers had been unable to contact hundreds of thousands of parents and children – often because they had moved on.”

Coles also highlighted that providers have gone to “real lengths” to contact people with accounts, while MHRC has also taken steps such as sending tax ambassadors into schools to explain the scheme, including information about CTFs when they send 16-year-olds their NI numbers.

However, she suggested that “more needs to be done” to let young people know about these accounts.

“There were 6.3 million accounts opened in total – 1.8 million of them opened by HMRC after parents didn’t make a choice,” Coles added. “It means the million young people with neglected accounts are likely just to be the first of many.”

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