Recommendations & Conclusions
26 items
2
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
Providers are charging fees for passively managing many Child Trust Funds and some could do more to connect young adults with their accounts. Providers can charge fees up to a cap of 1.5% per year on ‘stakeholder’ accounts, the most common type of Child Trust Fund account, which equates to …
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Providers are charging fees for passively managing many Child Trust Funds and some could do more to connect young adults with their accounts. Providers can charge fees up to a cap of 1.5% per year on ‘stakeholder’ accounts, the most common type of Child Trust Fund account, which equates to nearly £30 per year on a typical account and up to £100 million a year across all accounts. The Share Foundation described the charges as “very high indeed for fund management”, but HMRC claimed the charges are less than the annual growth of these investments. Providers are making even more money from some Child Trust Funds in other ways, for example, other types of Child Trust Fund have no cap on fees. The Share Foundation described a case in which a provider had asked the charity to pay £20 for a single account statement, which it declined to do. In many cases, providers are likely to be incurring very few costs from managing Child Trust Funds and to be making profits off savings mostly composed of government money. We heard that four providers have actively engaged with the Tracing Group—a commercial service for tracing the owners of dormant accounts—to set up a Child Trust Fund register. However, some providers are not doing enough to link up forgotten accounts with their owners. 6 Child Trust Funds Recommendation 2: HMRC should work in partnership with other parts of government to ensure that all providers are incentivised to establish contact with all young people whose Child Trust Funds they manage, and so that they earn fair fees, proportionate to their level of activity.
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Government response AI summary
The government agreed and stated the recommendation is implemented. HMRC is an active participant in a CTF working group, will continue to encourage providers, and highlights new FCA consumer duty rules requiring firms to deliver good outcomes and fair value.
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HM Treasury
3
Recommendation
Sixty-Seventh Report - Child Trust Funds
Accepted
The Child Trust Fund scheme is not easily accessible for the families and carers of children and young people lacking mental capacity. The Ministry of Justice estimates that between 63,000 and 126,000 young people may not have the mental capacity to access and manage their matured Child Trust Fund when …
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The Child Trust Fund scheme is not easily accessible for the families and carers of children and young people lacking mental capacity. The Ministry of Justice estimates that between 63,000 and 126,000 young people may not have the mental capacity to access and manage their matured Child Trust Fund when they reach adulthood. Instead, their family or carer must apply for legal authority to access and manage it on their behalf. However, the Court of Protection (covering England and Wales) approved only 15 such applications during 2021. Financial deputyship rules in Scotland and Northern Ireland are comparable to the rules in England and Wales, meaning similar issues are likely to have arisen. Fees are waived if families are only applying to access a Child Trust Fund but there are other barriers – we heard examples of a six-page GP letter being needed as part of the process, and the Downs Syndrome Association told us that low awareness about banking safeguards among parents it supports is a barrier to accessing their children’s Child Trust Funds. HMRC emphasised to us that the owners of matured Child Trust Funds are adults, and the law needs to protect their interests. Providers, the Ministry of Justice and HMRC are aware of the issue. HMRC said its guidance explains what people need to do. Some providers have, at their own risk, allowed families of young people without capacity to access funds in a Child Trust Fund up to £5,000. Recommendation 3a: In its Treasury Minute response, the government should set out what steps different bodies, including the Ministry of Justice and its equivalents in the home nations, are taking to help the families of young people who lack mental capacity to access their Child Trust Funds without excessive bureaucracy and cost. b) the government should include in the response statistics on how many people have used, successfully or otherwise, the current options available in each nation and set out the impact of the specific steps the govern
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Government response AI summary
The government agreed and detailed existing legal avenues (Mental Capacity Act, Court of Protection) for accessing CTFs for those lacking mental capacity, clarifying the application process and correcting cited statistics. It also provided application data for Northern Ireland and explained data collection limitations for Scotland, …
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HM Treasury
4
Recommendation
Sixty-Seventh Report - Child Trust Funds
Accepted
The objectives of the Child Trust Fund policy have not been achieved, but there is still time for HMRC to act. After establishing the scheme, HMRC showed little interest in achieving the wider objectives planned from government’s £2 billion investment. It regards the Child Trust Fund policy as having ended …
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The objectives of the Child Trust Fund policy have not been achieved, but there is still time for HMRC to act. After establishing the scheme, HMRC showed little interest in achieving the wider objectives planned from government’s £2 billion investment. It regards the Child Trust Fund policy as having ended in 2011 when the new government closed the scheme to new entrants, despite the scheme being very much live and most accounts yet to mature. Its focus has been on raising awareness of Child Trust Funds and not on the other policy objectives. Disappointingly, the scheme has not been used to support young people’s financial education and improve financial literacy. The Share Foundation believes that only about 25% of students leave school saying that they have been adequately prepared in financial awareness. The duty to implement the policy was not fully HMRC’s but it did not establish the partnerships with other departments and organisations needed to implement and achieve the policy’s objectives. HM Treasury has not given HMRC dedicated funding for the scheme, nor supported it to do more with Child Trust Child Trust Funds 7 Funds. We are concerned that Child Trust Funds will become another example of a legacy financial product that is not given the necessary attention by government to succeed against its aims over the long term. Recommendation 4: HMRC should: a) act immediately to ensure that the most is made from the Child Trust Fund scheme. In its Treasury Minute response, it should set out how it will work with other government departments, including DfE, the MoJ and HMT, and other organisations to plan and implement activity which addresses all four of the Child Trust Fund policy’s objectives. b) make an assessment of whether similar issues are likely to affect other tax- free savings accounts the government is currently planning, promoting, and/or making contributions towards, such as lifetime ISAs and Junior ISAs for children in care. The government should wo
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Government response AI summary
The government agreed and stated the recommendation is implemented. It outlined HMRC's ongoing evaluation of CTF operational aspects that inform changes to other savings schemes, and described existing quarterly meetings with DfE and The Share Foundation regarding CTFs for looked after children. The response also …
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HM Treasury
5
Conclusion
Sixty-Seventh Report - Child Trust Funds
Acknowledged
HMRC does not collect the data from providers needed to plan timely action to improve young people’s engagement with their accounts and assess whether its actions are working. HMRC’s understanding of Child Trust Fund accounts that have matured but are yet to be claimed is nearly two years out-of-date: its …
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HMRC does not collect the data from providers needed to plan timely action to improve young people’s engagement with their accounts and assess whether its actions are working. HMRC’s understanding of Child Trust Fund accounts that have matured but are yet to be claimed is nearly two years out-of-date: its most recent estimate is based on data collected in April 2021, just seven months after the first accounts matured. It intends to publish its next set of statistics in summer 2023 based on data from April 2022. It told us it cut back its monitoring and compliance activity on the scheme from 2013, when the risk of tax loss from people opening Child Trust Funds they were not entitled to had fallen significantly. Consequently, since then HMRC has not been actively protecting Child Trust Fund customers (although the standard protections provided by the FCA still apply) or monitoring providers’ behaviour. HMRC has also not kept its records on Child Trust Funds up to date, affecting the effectiveness of its tracing tool. Recommendation 5: HMRC should: a) improve the timeliness of its data collection and statistical releases, to present a more accurate and up-to-date assessment of the scheme. b) use this improved understanding of the status of Child Trust Funds to target activity to improve young people’s awareness and management of their accounts.
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Government response AI summary
The government agreed, stating the recommendation is implemented. HMRC has reviewed its awareness and tracing strategy, is confident in its current approach, and will continue to explore new routes and monitor unclaimed accounts to determine when further intervention is appropriate.
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HM Treasury
6
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
HMRC is not planning to re-evaluate the scheme or learn lessons from its implementation that could help in the design or improvement of similar schemes. HMRC published an interim evaluation of the scheme in 2011 but has not reassessed the scheme since young adults first started claiming their money from …
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HMRC is not planning to re-evaluate the scheme or learn lessons from its implementation that could help in the design or improvement of similar schemes. HMRC published an interim evaluation of the scheme in 2011 but has not reassessed the scheme since young adults first started claiming their money from matured accounts, which was in 2020. It claims there is no “particular appetite” for further evaluation. It told us that only ministers can decide if an evaluation of the scheme should be undertaken, with which we disagree. HMRC told us that its involvement in initiating evaluations is centred on advising ministers on the tax system, including areas it believes require further analysis. HMRC told us that from a policy perspective it learns lessons from previous work and creates ‘playbooks’ for 8 Child Trust Funds future policies. However, it is unclear to us how HMRC officials can give ministers comprehensive and up-to-date advice without sufficient evaluation of its schemes. It told us that government has learnt lessons from the experience of introducing Child Trust Funds, including on how to approach groups with very different levels of engagement with a universal scheme, but it has provided no detail of how those lessons have been learnt or where that learning has been captured. The engagement of the Share Foundation to manage Child Trust Funds on behalf of children in care has given a focus to those accounts and should be a lesson for HMRC on how to make its schemes work well for hard-to-reach groups. Recommendation 6: HMRC should, at the appropriate time within the next 24 months, evaluate the scheme to understand what has been achieved from government’s £2 billion investment and what impact it has had on the lives of young people and identify lessons that would benefit similar schemes in the future, particularly around how to design and implement a scheme that works well for vulnerable groups. Child Trust Funds 9 1 Access to Child Trust Funds
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Government response AI summary
The government agreed with the recommendation to evaluate the CTF scheme, stating a more detailed plan for evaluation will be formalised in Winter 2023. It also committed to publishing external research programmes and evaluation lists in line with good practice.
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HM Treasury
1
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Revenue & Customs (HMRC) and The Share Foundation regarding the Child Trust Fund scheme.1
Government response AI summary
The government stated it has processes to contact young people about unclaimed CTFs, published updated information in June 2023, and actively engages with partners to raise awareness. It has also developed a detailed communications plan targeting different age groups and will explore further tracing methods …
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HM Treasury
7
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
HMRC told us that some young people may have consciously chosen not to claim their savings yet, but The Share Foundation told us that accounts typically go unclaimed because the young person does not know that the money is there and the account provider does not have their current address.9 …
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HMRC told us that some young people may have consciously chosen not to claim their savings yet, but The Share Foundation told us that accounts typically go unclaimed because the young person does not know that the money is there and the account provider does not have their current address.9 Providers are experiencing difficulties contacting many account holders.10 HMRC has increased its communications since 2018. In 2020, it ran a social media communications campaign that led to peaks in enquiries. It also issued press notices in September 2021, prompting a feature on the Martin Lewis Show, and in October 2022, prompting 82 press articles and an eight-fold increase in queries to its ‘Find My CTF’ service. However, HMRC acknowledges Child Trust Fund account holders are not its usual audience, and that there are lessons to be learnt on how government communicates with disengaged groups.11 Providers’ charges and stewardship of the accounts
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Government response AI summary
The government agrees and states the recommendation is implemented, detailing HMRC's ongoing processes to find and contact young people with unclaimed CTFs. This includes engaging external partners, working with other government departments, and implementing a detailed communications plan targeting specific age groups to raise awareness.
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HM Treasury
8
Conclusion
Sixty-Seventh Report - Child Trust Funds
Deferred
Providers can charge fees up to a cap of 1.5% per year on ‘stakeholder’ accounts, the most common type of Child Trust Fund account, which The Share Foundation described as equating to nearly £30 per year on a typical account. HMRC does not track how much providers are charging. The …
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Providers can charge fees up to a cap of 1.5% per year on ‘stakeholder’ accounts, the most common type of Child Trust Fund account, which The Share Foundation described as equating to nearly £30 per year on a typical account. HMRC does not track how much providers are charging. The NAO found that the largest providers are likely to be charging the maximum rate and estimated that providers could be earning collectively up to £100 million per year through charges on Child Trust Funds. The Share Foundation described the charges as “very high indeed for fund management”, but HMRC claimed the charges are less than the annual growth of these investments.12
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Government response AI summary
The government agrees with the Committee's observation on CTF provider fees but states that providers have the lead responsibility for terms and conditions, which are industry matters. HMRC will encourage providers via a working group to adhere to their responsibilities under FCA rules, including the …
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HM Treasury
9
Conclusion
Sixty-Seventh Report - Child Trust Funds
Deferred
Providers are making even more money from some Child Trust Funds in other ways, as other types of Child Trust Fund have no cap on fees. Around 1.3 million Child Trust Funds (0.3 million stocks and shares accounts and 1.0 million cash deposit accounts) are not subject to the cap …
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Providers are making even more money from some Child Trust Funds in other ways, as other types of Child Trust Fund have no cap on fees. Around 1.3 million Child Trust Funds (0.3 million stocks and shares accounts and 1.0 million cash deposit accounts) are not subject to the cap on fees. The Share Foundation described a case in which a provider had asked the charity to pay £20 for a single account statement, which it declined to do.13 7 Qq 24, 37, 56 8 Q 26, C&AG’s Report, para 2.4 9 Qq 25, 26 and 34 10 Qq 40–42 11 Qq 28, 46–47, 55; Correspondence from HMRC to PAC dated 7 June 2023 12 Qq 33, 35, 37; C&AG’s Report, para 3.8 13 Qq 35–36; C&AG’s Report, Figure 2 Child Trust Funds 11
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Government response AI summary
The government agrees with the Committee's observation on uncapped CTF fees but states that providers have the lead responsibility for terms and conditions, which are industry matters. HMRC will encourage providers via a working group to adhere to their responsibilities under FCA rules, including the …
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HM Treasury
10
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
In many cases, the providers are likely to be making profits off savings mostly composed of government money. From the start of the scheme until 2010, just over one- third of Child Trust Funds (37%) received additional payments into them other than from the government. More recently, in the 2020–21 …
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In many cases, the providers are likely to be making profits off savings mostly composed of government money. From the start of the scheme until 2010, just over one- third of Child Trust Funds (37%) received additional payments into them other than from the government. More recently, in the 2020–21 tax year, 4.6 million Child Trust Fund accounts out of the 5.5 million accounts on which HMRC had data received no additional money. One of our witnesses, who had previous experience working at a Child Trust Fund provider, told us that providers are likely to be incurring very few costs from managing a typical Child Trust Fund.14 Since April 2011, providers do not have to produce annual statements for accounts which have not received any payments (except for any from government) in the previous 12 months. However, providers are still required to provide statements in the year following the children’s 10th, 15th and 17th birthdays.15
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Government response AI summary
The government agrees with the 'recommendation' (which was a conclusion) and states it's implemented, explaining that HMRC is actively involved in a working group to ensure Child Trust Fund providers trace and engage with account holders under FCA rules.
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HM Treasury
11
Conclusion
Sixty-Seventh Report - Child Trust Funds
Deferred
We heard that only four providers, out of around 55 in total, have been proactive and voluntarily worked in partnership with the Tracing Group—a commercial service for tracing the owners of dormant accounts—to set up a Child Trust Fund register separate to the one held by HMRC. The register contains …
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We heard that only four providers, out of around 55 in total, have been proactive and voluntarily worked in partnership with the Tracing Group—a commercial service for tracing the owners of dormant accounts—to set up a Child Trust Fund register separate to the one held by HMRC. The register contains details of around 60% of all Child Trust Funds and is proving to be an effective way for young people to trace their accounts. However, the Share Foundation told us that most account providers are not showing much enthusiasm for helping young people to trace their accounts.16 Access for young people lacking the mental capacity to manage their savings
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Government response AI summary
The government agrees with the Committee's observation regarding provider proactivity in tracing accounts but states that CTF providers have the lead responsibility for tracing. HMRC will continue to encourage providers through a working group to adhere to their responsibilities under FCA rules, including the new …
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HM Treasury
12
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
To access the Child Trust Fund of a young person who lacks mental capacity, their family or carer must gain legal authority to do so by applying to the Court of Protection for a deputyship order if living in England and Wales. The Ministry of Justice estimates that between 63,000 …
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To access the Child Trust Fund of a young person who lacks mental capacity, their family or carer must gain legal authority to do so by applying to the Court of Protection for a deputyship order if living in England and Wales. The Ministry of Justice estimates that between 63,000 and 126,000 young people may not have the mental capacity to access and manage their matured Child Trust Fund when they reach 18. However, the Court of Protection approved only 15 such applications during 2021. HMRC told us it understands that financial deputyship rules in Scotland and Northern Ireland are comparable to the rules in England and Wales. Similar issues are therefore likely to have arisen across the United Kingdom.17
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Government response AI summary
The government agrees and states the recommendation is implemented. It highlights ongoing cross-government work (HMRC, MoJ, DWP) to support families, including publicising fee waivers for access to Child Trust Funds and explaining legal aid provisions in Scotland and Northern Ireland.
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HM Treasury
13
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
Families have reported finding the deputyship application process difficult, time- consuming, and costly.18 Fees are waived if families are only applying to access a Child Trust Fund but there are other barriers – we heard examples of a six-page GP letter being needed as part of the process. The Down’s …
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Families have reported finding the deputyship application process difficult, time- consuming, and costly.18 Fees are waived if families are only applying to access a Child Trust Fund but there are other barriers – we heard examples of a six-page GP letter being needed as part of the process. The Down’s Syndrome Association told us that low awareness about banking safeguards among parents it supports is a barrier to accessing their children’s Child Trust Funds. It explained the fee waiver does not apply if the young adult is still in education, and that many families believe they also need to pay for services of a solicitor.19
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Government response AI summary
The government agrees and states the recommendation is implemented, detailing ongoing cross-government work and the existing fee waiver for Child Trust Fund access applications. They also mention provisions for legal aid in Scotland and the application process in Northern Ireland, aiming to address reported difficulties …
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HM Treasury
14
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
Providers, the Ministry of Justice and HMRC are aware of the issue. Some providers have, at their own risk, allowed families of young people without the capacity to manage 14 Qq 26, 35; C&AG’s Report, para 8; HM Revenue & Customs, Annual savings statistics 2022, June 2022. See Child Trust …
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Providers, the Ministry of Justice and HMRC are aware of the issue. Some providers have, at their own risk, allowed families of young people without the capacity to manage 14 Qq 26, 35; C&AG’s Report, para 8; HM Revenue & Customs, Annual savings statistics 2022, June 2022. See Child Trust Fund Tables, table 2: Subscriptions to CTFs. 15 C&AG’s Report, para 1.8 16 Qq 33, 38–39, 43; C&AG’s Report, paras 3.6, 4.10 17 Qq 50, 61, 79–80; C&AG’s Report, para 4.13 18 C&AG’s Report, para 4.13 19 Q 48–49, 51; CTF0001; C&AG’s Report, para 4.13 12 Child Trust Funds the fund themselves to access funds in a Child Trust Fund up to £5,000. The Ministry of Justice recently consulted on a scheme to allow easier access to small funds. Many respondents suggested allowing applicants to demonstrate their suitability to access a young person’s small funds, such as a typical Child Trust Fund, by proving that they have already been given authority by government to manage the same young person’s benefits or other accounts. The Ministry of Justice decided not to proceed with the proposals.20 HMRC emphasised to us that the owners of matured Child Trust Funds are adults, and the law needs to protect their interests, finding a balance between safeguarding vulnerable young adults and helping the people who have their best interests at heart to manage their assets. It told us that its guidance explains what people need to do.21 20 Qq 48, 51–52; Ministry of Justice, Mental Capacity Act: Small Payments Scheme: Consultation response; May 2023 21 Q 52 Child Trust Funds 13 2 Learning from the Child Trust Fund scheme Achieving the scheme’s policy objectives
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Government response AI summary
The government agrees and states the recommendation is implemented, outlining ongoing cross-government efforts and previously publicised fee waivers for Child Trust Fund access. They describe existing legal frameworks and support for accessing funds in all UK nations, aiming to balance safeguarding with ease of access.
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HM Treasury
15
Conclusion
Sixty-Seventh Report - Child Trust Funds
Rejected
HMRC regards the Child Trust Fund policy as having “ended in 2011”, and as an “old scheme” as opposed to an existing scheme.22 This is despite the scheme being very much live, as most young people who benefitted from the scheme have not yet reached the age at which they …
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HMRC regards the Child Trust Fund policy as having “ended in 2011”, and as an “old scheme” as opposed to an existing scheme.22 This is despite the scheme being very much live, as most young people who benefitted from the scheme have not yet reached the age at which they can access their Child Trust Fund.23
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Government response AI summary
The government disagrees with the Committee's observation that HMRC views the CTF scheme as 'ended' or 'old'. It reiterates its commitment to ensuring all children and families can access matured CTFs and believes existing savings frameworks address the underlying policy objectives.
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HM Treasury
16
Conclusion
Sixty-Seventh Report - Child Trust Funds
Rejected
HMRC saw its role as setting up of the accounts and transferring government funding into them, which it believes it did effectively.24 The Child Trust Fund scheme’s policy objectives also include helping people understand the benefits of saving and investing; encouraging parents and children to develop the habit of saving …
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HMRC saw its role as setting up of the accounts and transferring government funding into them, which it believes it did effectively.24 The Child Trust Fund scheme’s policy objectives also include helping people understand the benefits of saving and investing; encouraging parents and children to develop the habit of saving and engage with financial institutions; and building on financial education.25 HMRC’s told us it has not particularly had a role in financial education, although it has included information about Child Trust Funds in the materials it provides to its ‘tax ambassadors’, who visit schools to teach young people about tax.26 HMRC has no plans to examine whether the Child Trust Fund scheme has had an impact on financial literacy, and nor does any other part of government. The Share Foundation told us that it believes only about 25% of students leave school saying that they have been adequately prepared in financial awareness. We expressed concern about HMRC’s lack of curiosity about whether the policies it is implementing are working.27
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Government response AI summary
The government disagrees with the Committee's concern regarding HMRC's role in financial education related to CTFs. It asserts that existing policies like Help to Save, Junior ISA, and Lifetime ISA, alongside statutory PSHE and guidance from MAPS, adequately address financial literacy objectives.
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HM Treasury
17
Conclusion
Sixty-Seventh Report - Child Trust Funds
Rejected
HMRC made clear its view that the duty to implement the policy was not fully its responsibility. HM Treasury has not given HMRC dedicated funding for the scheme. The Share Foundation believes that HM Treasury is not allowing HMRC to do more with Child Trust Funds, despite some in HMRC …
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HMRC made clear its view that the duty to implement the policy was not fully its responsibility. HM Treasury has not given HMRC dedicated funding for the scheme. The Share Foundation believes that HM Treasury is not allowing HMRC to do more with Child Trust Funds, despite some in HMRC wanting to do so. However, HMRC has not established effective partnerships with other departments and organisations involved in Child Trust Funds, a step which it acknowledges is needed to implement and achieve the policy’s objectives.28
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Government response AI summary
The government explicitly rejects the recommendation, stating it believes the existing policy framework for savings (Help to Save, Junior ISA, Lifetime ISA) and current collaborative efforts already address the need for financial education and access to funds.
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HM Treasury
18
Conclusion
Sixty-Seventh Report - Child Trust Funds
Rejected
We are concerned that Child Trust Funds will become another example of a legacy financial product that is not given the necessary attention by government to succeed against its aims over the long-term. We have noticed in other projects that legacy products often have very high fees because they are …
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We are concerned that Child Trust Funds will become another example of a legacy financial product that is not given the necessary attention by government to succeed against its aims over the long-term. We have noticed in other projects that legacy products often have very high fees because they are under no real scrutiny.29 Monitoring the scheme
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Government response AI summary
The government explicitly rejects the recommendation (even though it's a conclusion), stating it remains committed to ensuring access to CTFs and addresses barriers through cross-government collaboration. It then explains its broader policy framework for encouraging savings through other schemes like Help to Save, Junior ISAs, …
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HM Treasury
19
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
HMRC’s understanding of accounts yet to be claimed is nearly two years out-of-date: its most recent estimate of the number of Child Trust Fund accounts yet to be claimed 22 Qq 27, 86; Hansard, HC written answer, Child Trust Fund, UIN 181783, answered 24 April 2023 23 Q 1; C&AG’s …
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HMRC’s understanding of accounts yet to be claimed is nearly two years out-of-date: its most recent estimate of the number of Child Trust Fund accounts yet to be claimed 22 Qq 27, 86; Hansard, HC written answer, Child Trust Fund, UIN 181783, answered 24 April 2023 23 Q 1; C&AG’s Report, para 4.2 24 Qq 69, 94 25 Q 72 ; C&AG’s Report, para 4.15 26 Qq 72–75 27 Qq 66, 89, 92–93 28 Qq 44, 81–82, 94 29 Qq 34, 87 14 Child Trust Funds is based on data collected in April 2021, seven months after the first accounts matured. It told us that it intends to publish its next set of statistics in summer 2023 based on data from April 2022.30
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Government response AI summary
The government agrees to provide more timely information on CTFs, with a target implementation date of Summer 2024. HMRC is exploring opportunities for more timely publication, has reminded providers of return requirements, and has already published updated statistics up to April 2022 in June 2023.
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HM Treasury
20
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
HMRC receives annual returns from providers with information about Child Trust Funds, including the number of accounts held and the number that have not been accessed by their owners. It told us that in the period when new accounts were being opened it received fortnightly returns from providers, but it …
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HMRC receives annual returns from providers with information about Child Trust Funds, including the number of accounts held and the number that have not been accessed by their owners. It told us that in the period when new accounts were being opened it received fortnightly returns from providers, but it cut back its monitoring and compliance activity on the scheme in 2013.31
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Government response AI summary
The government agrees and aims to implement by Summer 2024, committing HMRC to explore publishing more timely Child Trust Fund information, remind providers of return requirements, and improve analytical processes. HMRC has already published updated statistics and addressed issues with missing returns.
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HM Treasury
21
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
HMRC judged that, by 2013, the risk of tax loss from people opening Child Trust Funds they were not entitled to had fallen significantly. Few Child Trust Funds were opened after this point. We questioned whether HMRC had also assessed the risk of Child Trust Funds being mismanaged, such that …
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HMRC judged that, by 2013, the risk of tax loss from people opening Child Trust Funds they were not entitled to had fallen significantly. Few Child Trust Funds were opened after this point. We questioned whether HMRC had also assessed the risk of Child Trust Funds being mismanaged, such that young people might be losing money. HMRC told us that it has not been actively protecting Child Trust Fund customers or monitoring providers’ behaviour, although the standard protections provided by the Financial Conduct Authority still apply.32
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Government response AI summary
The government agrees and aims to implement by Summer 2024, committing HMRC to exploring publishing more timely Child Trust Fund information, reminding providers of return requirements, and improving analytical processes, which would implicitly aid in assessing mismanagement risks.
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HM Treasury
22
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
HMRC has not kept its records on Child Trust Funds up to date, affecting the quality of its tracing tool. This means young people trying to trace their accounts through the Government Gateway are receiving data from HMRC that have not been updated since their account was originally opened, typically …
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HMRC has not kept its records on Child Trust Funds up to date, affecting the quality of its tracing tool. This means young people trying to trace their accounts through the Government Gateway are receiving data from HMRC that have not been updated since their account was originally opened, typically around 18 years ago. It is likely that the provider for many of these accounts will have changed, as the NAO found the number of Child Trust Fund providers has reduced from 74 in April 2011 to 55 in February 2023, due to providers merging or exiting from the market. HMRC acknowledged that some people need further assistance to interpret the responses they get from HMRC about their Child Trust Funds.33 It has no way of knowing how many queries to the service resulted in someone successfully finding their Child Trust Fund. Young people using the Government Gateway need to verify their identity, which The Share Foundation told us many find challenging.34 Evaluation and learning from the scheme
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Government response AI summary
The government agrees with the 'recommendation' (which was a conclusion) and commits to improving Child Trust Fund data quality by exploring more timely information, reminding providers of return requirements, and enhancing analytical processes by summer 2024.
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HM Treasury
23
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
HMRC has not published an evaluation of the scheme since 2011. It has not reassessed the scheme now that young adults are claiming their accounts, stating that there is no “particular appetite” for this.35 The Share Foundation described “quite a bit of international interest” in the outcomes of the Child …
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HMRC has not published an evaluation of the scheme since 2011. It has not reassessed the scheme now that young adults are claiming their accounts, stating that there is no “particular appetite” for this.35 The Share Foundation described “quite a bit of international interest” in the outcomes of the Child Trust Fund scheme, and told us Bristol University has approached it about conducting survey research into young people who have found their Child Trust Funds through the independent Child Trust Fund register.36
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Government response AI summary
The government agrees and commits to formalising a detailed plan for the evaluation of the Child Trust Fund scheme by Winter 2023, with a target implementation date of Summer 2025. HMRC will also be open to external researchers accessing its data for analysis.
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HM Treasury
24
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
HMRC told us that from a policy perspective it learns lessons from previous work and creates ‘playbooks’ for future policies. While we are glad to hear that HMRC does this, we expressed concern that it is in a position to offer advice to ministers only on how to implement a …
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HMRC told us that from a policy perspective it learns lessons from previous work and creates ‘playbooks’ for future policies. While we are glad to hear that HMRC does this, we expressed concern that it is in a position to offer advice to ministers only on how to implement a scheme similar to Child Trust Funds, rather than on whether the 30 Q 24; C&AG’s Report, para 3.3 31 Q 30; C&AG’s Report, para 4.2 32 Qq 30–33; C&AG’s Report, para 3.5 33 Qq 44, 85; C&AG’s Report, para 10 34 Qq 44, 93; C&AG’s Report, para 4.8 35 Qq 64–65, 86 36 Q 65 Child Trust Funds 15 evidence suggests such a scheme would be an effective use of taxpayers’ money.37 HMRC told us that government has learnt lessons about implementing a universal scheme from the experience of Child Trust Funds, including about the importance of partnerships, and about how to approach groups with very different levels of engagement. However, it provided no detail of how those lessons have been learnt or where that learning has been captured.38
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Government response AI summary
The government agrees and commits to formalising a detailed plan for evaluation by Winter 2023 (targeting Summer 2025 implementation). This commitment to evaluation, including allowing external researchers access to data, aims to capture lessons and inform future policy, implicitly addressing concerns about the scope of …
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HM Treasury
25
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
The engagement of the Share Foundation to manage Child Trust Funds on behalf of children in care has given a focus to those accounts. The Share Foundation told us about the disciplined handover process it has introduced to ensure that when young people whose accounts it manages approach the age …
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The engagement of the Share Foundation to manage Child Trust Funds on behalf of children in care has given a focus to those accounts. The Share Foundation told us about the disciplined handover process it has introduced to ensure that when young people whose accounts it manages approach the age of 18, they are made aware of their account and are offered financial awareness training to help them to manage their savings effectively.39
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Government response AI summary
The government agrees with the committee's conclusion, stating the recommendation is implemented. They highlight ongoing evaluation of the CTF scheme, regular quarterly meetings with The Share Foundation, and continuous monitoring of its performance.
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HM Treasury
26
Conclusion
Sixty-Seventh Report - Child Trust Funds
Accepted
When we questioned HMRC on what would trigger it to evaluate the scheme, it told us that it would need ministers to request it. We queried the extent to which looking at the impact of a scheme is a political policy decision, as opposed to a decision for officials, and …
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When we questioned HMRC on what would trigger it to evaluate the scheme, it told us that it would need ministers to request it. We queried the extent to which looking at the impact of a scheme is a political policy decision, as opposed to a decision for officials, and expressed concern at how little evaluation is done across government. HMRC noted that its involvement in initiating evaluations is centred on its role advising ministers on the tax system, including areas it believes require further analysis.40 It cannot identify how much it typically spends on evaluation as it does not track these costs separately from general policy and programme delivery costs. It spent £5.9 million on external research in 2022–23, of which it estimates around one-third was on evaluation. In comparison, its operational (DEL) spending limit for the same year was £7.1 billion.41 37 Qq 87–88 38 Qq 55, 82, 94 39 Qq 56–57 40 Qq 86–88 41 Correspondence from HMRC to PAC dated 7 June 2023; HM Treasury, Central Government Supply Estimates 2022–23: Main Supply Estimates, HC 396, June 2022, page 356 16 Child Trust Funds
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Government response AI summary
The government agrees with the committee’s concern, committing to formalising a detailed evaluation plan for Winter 2023 and publishing its external research programmes by Summer 2025. They acknowledge the need for careful and proportionate evaluation, especially for discontinued schemes like CTF.
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HM Treasury