Source · Select Committees · Public Accounts Committee
Recommendation 4
4
Accepted
Require HMRC to immediately maximise Child Trust Fund benefits and assess similar future savings schemes.
Recommendation
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
Government Response 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 highlighted how technological advancements in newer schemes (LISA, Help to Save) reflect lessons learned from the older CTF design.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented HMRC undertakes on-going evaluation of the operational aspects of the CTF scheme based on provider and user comment and research. This information informs changes to both existing and prospective savings schemes. For example, amendments to the CTF legislation is reflected in the Junior ISA and ISA legislation and vice versa. The technology landscape has changed significantly for HMRC and the financial services industry since the CTF scheme was developed in 2004, and what was an appropriate operating model then would be unlikely to be employed now. For example, the Lifetime ISA (LISA) which was introduced in 2017 is a digital system which requires monthly on-line reporting by ISA managers and the mandatory use of national insurance numbers. The Help to Save Scheme uses DWP data to confirm eligibility and its use of the government gateway to create account ensures HMRC has email addresses for participants in the scheme. In contrast, the CTF scheme employed paper vouchers for account opening and is dependent on parents informing HMRC and account providers of changes in their personal details, making it challenging to contact account holders. In the context of looked after children, quarterly meetings take place between HMRC, the DFE and The Share Foundation (TSF). A meeting took place in August and the next meeting is provisionally scheduled for late Autumn. Those meetings provide the opportunity to explore any obstacles (whether operational or legislative) to TSF’s effective management of the CTFs and Junior ISAs of looked after children. The Share Foundation reports quarterly and annually on its performance and those of local authorities, The regular meetings also provide the opportunity to monitor TFS’s performance, which will subsequently inform any amendments to the commercial contract.