Recommendation 2

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.