Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Accepted
Incentivise Child Trust Fund providers to contact young people and charge fair, proportionate fees
Conclusion
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.
Government Response 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.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented Child Trust Fund (CTF) providers have the lead responsibility in making sure account holders are aware of and have access to their accounts. HMRC is an active participant in the dedicated CTF working group which comprises trade bodies such as The Investing and Saving Alliance and UK Finance, and CTF providers such as OneFamily and Nationwide Building Society. As set out above, the need for CTF providers to trace, and engage with, account holders is an established feature of discussions. HMRC will continue to use these meetings to encourage further activity on the part of CTF providers, who are aware of their responsibilities to their customers under Financial Conduct Authority (FCA) rules. While terms and conditions are a matter for the industry, the new FCA consumer duty rules require firms to act to deliver good outcomes for retail customers and provide products and services which offer fair value. HMRC also acts on any intelligence it receives from FCA or others regarding compliance problems with CTFs.