Generation Z are missing out on billions of pounds in savings because the tax man has failed to tell them it exists.
Tax-free pots, known as child trust funds, were gifted out by then-chancellor Gordon Brown two decades ago and are now worth £2,212 on average.
However, HM Revenue and Customs (HMRC) has been accused of failing to adequately notify savers – leading to potentially billions unclaimed.
Financial planners blamed the lack of interest in the accounts on the priorities of young people and poor communication from the Government.
Up to £500 was gifted to young people born between 2002 and 2011 by the Treasury during the last Labour government – this money can be withdrawn from the age of 18.
Figures released by HMRC this month show 671,000 savers aged between 18 and 22 have not claimed the cash.
Last year, the spending watchdog published figures showing there were 145,000 unclaimed matured child trust funds held by 18-year-olds in 2021 worth a total of almost £400m.
In 2021, the average amount in accounts was £1,500 according to HMRC data, with the overall value of all unclaimed accounts estimated to be as high as £3bn.
The scheme, brought in during Gordon Brown’s time as chancellor, was a Labour manifesto pledge and came into effect from 2005. It was scaled back in 2010 and scrapped altogether a year later.
Financial planners blamed the lack of interest in the accounts on the priorities of young people and poor communication from the Government.
Rachael Griffin, of wealth manager Quilter, said: “Between 18 and 20, you are probably more concerned about the here and now rather than long term financial security.”
She added HMRC’s campaign to raise awareness about child trust funds could also be more effective. “There is a question about how it is being run and whether it is being run for the right people. I don’t know if the current 18, 19 or 20-year-old is reading HMRC’s press releases.”
Alice Haine, of wealth manager Evelyn Partners, said: “The Government needs to engage more proactively and directly with child trust fund holders as well as the parents to ensure young people are not only made aware that they have an account but also understand that they can access the money to spend or reinvest as they choose.”
Some £2bn was paid into the accounts to more than 6 million children between 2002 and 2011, with most children receiving around £250 each or rising to £500 for low-income families and children in care.
Parents and grandparents were able to contribute extra funds to the account until the child turned 18, at which point the funds could be withdrawn and either spent or reinvested.
To track down their child trust fund details, an eligible saver needs to enter their National Insurance number and date of birth on the government website. The trusts are not held by the Government, but individual banks and building societies.
Angela MacDonald, deputy chief executive of HMRC, said: “Thousands of child trust fund accounts are sitting unclaimed – we want to reunite young people with their money and we’re making the process as simple as possible.”
A HMRC spokesman said: “We’re continually raising awareness and every young person is sent information about finding their Child Trust Fund with their National Insurance letter.
“Banks, building societies and investment firms managing the funds are also responsible for communicating with account holders.”
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