Child Trust Fund review: Consumer Duty's next enforcement frontier

The FCA has quietly opened a front that should concentrate minds in every insurance and long-term savings boardroom. Alongside a consumer awareness push on unclaimed Child Trust Funds, the regulator has launched a review examining contact failures, fair value under the Consumer Duty, and access barriers for vulnerable young adults (FCA). The review reports next year, which gives providers a narrow window to get ahead of findings.

Key Executive Takeaways

• The FCA is reviewing Child Trust Fund providers on contact failures at age 18 and whether customers receive fair value under the Consumer Duty, with findings due in 2027.
• HMRC data shows 760,000 matured Child Trust Funds worth an average of £2,000 each remain unclaimed, exposing providers to dormancy, disengagement and vulnerability risks that map directly onto Consumer Duty outcomes.
• Third party tracing firms are charging up to £400 or monthly subscriptions for a service consumers can access free, and the FCA notes these firms may fall outside its fee cap and Ombudsman jurisdiction, creating a reputational spillover for regulated providers.

The dormancy problem is now a Consumer Duty problem

Child Trust Funds were available to children born between 1 September 2002 and 2 January 2011, with roughly 6.3 million accounts opened in total (FCA). The scheme is closed to new business, but the maturities are now rolling through in volume, and the FCA's framing has shifted. Dormant balances are no longer a benign administrative footnote. They are evidence, in the regulator's eyes, that firms may be failing the consumer support and consumer understanding outcomes of the Duty.

That matters because the review will specifically examine cases where young adults cannot be contacted at 18 and risk losing touch with their savings altogether (FCA). Providers who have relied on last-known parental addresses, or who have not invested in digital reconnection strategies, are exposed. The economics are unhelpful: average balances of £2,000 do not justify high-touch outreach on a per-account basis, yet the Duty does not scale its expectations to product margin.

The claims management flank

Chris Knight, director of insurance at the FCA, said customers should 'think twice about handing over a chunk of your savings to a claims firm for a job you can do yourself' (FCA). The regulator has seen firms charging £400 to locate an account, and even monthly subscriptions for a one-off tracing service. Critically, tracing is not generally an FCA-authorised activity, so the fee cap on claims management does not bite and the Ombudsman route may not be available.

For providers, this creates a second-order problem. Every pound extracted by an intermediary is a pound the customer did not receive from a regulated firm's product, and the FCA will read that outcome through the Duty's fair value lens. Boards should expect questions about what proactive tracing and reconnection they have funded before the market gap was filled by paid intermediaries.

What senior leaders should do now

The practical response has three components. First, quantify the book: how many matured accounts sit dormant, what is the average balance, and what proportion of 18-year-olds successfully claim within twelve months. Second, stress-test contact strategies against the vulnerability lens the FCA has flagged, particularly for care leavers and young adults without settled addresses. Third, prepare a defensible narrative on fair value that does not rely on scheme-level economics alone.

The review reports in 2027. Firms that wait for the findings will be reacting to a supervisory position already formed. Those that move now can shape it.