Future assets

Children leaving care should be given access to a targeted
independence trust fund. This would provide them with a nest egg to
invest in their futures and enable them to take opportunities. It
would allow young care leavers to think longer-term, feel more
secure and help them with the transition into independent
adulthood.

This proposal builds on existing thinking about the role that
wealth, or assets, can play in improving people’s life chances.
Increased interest from policy makers has focused on asset-based
welfare. Already the government has announced the Child Trust Fund
(CTF) or baby bond as part of this new agenda.

The CTF is intended to provide an asset for all young adults. It
will provide all newborn children with an endowment paid into an
individual account. This money will then accumulate with the aid of
state tops-ups and contributions from account holders and their
families, and after 18 years will be available to spend.

Empirical evidence supports the proposal that having an asset in
early adulthood will improve life chances. There is a strong
relationship between possessing financial wealth in early adulthood
and later life outcomes.

Financial assets also help people cope with transitional stages
in life. There can be no more difficult transition than moving from
being in care to fully independent adulthood.

The CTF will be available to all newborn children. Eligibility
will be triggered by the initial claim for child benefit, meaning
that children in care will have a CTF. But does the policy reflect
the needs of especially disadvantaged groups?

Children in care, with their significantly poorer life chances,
might be in the most need of an asset in their early adulthood.
They are more likely to be homeless soon after leaving care, less
likely to be employed and less likely to have educational
qualifications. However, at the same time they might not be able to
accumulate as much as other children in the CTF. This is because
there are likely to be less family and individual contributions.
Paradoxically those who need the nest egg most might actually
receive the smallest fund at 18.

So it is important to develop an adapted policy for care
leavers, which supplements and complements the CTF. Current support
for care leavers comes from three sources: income-based provision;
service delivery (such as education); and guidance from personal
advisers. A specifically tailored asset-based policy could
complement these.

Many children leave care with nothing they can call their own. A
specific trust fund would provide flexible support that would
enhance the autonomy of these young adults. This group would also
benefit particularly from the psychological benefits of asset
holding and the ability of an asset to help with the transition
into independent adult life.

An independence trust fund could be implemented in several ways.
Funds could be accumulated though the strategic issuing of lump
sums or endowments at certain ages, through ongoing payments into
accounts or through a hybrid of the two. Weekly payments could be
linked to child benefit, which is currently not received by
children in foster care or local authority homes.

The advantage of lump sums is that support could be targeted
better at those making the transition into independent adulthood.
Their disadvantage is that it would not ensure an engagement in the
accumulation of the fund. Weekly payments would not present this
problem, but they might not target those in the most need, as they
effectively equate length of time spent in care with need.

Irrespective of the method used, there are other important
policy questions. Although care leavers would remain eligible for
the basic CTF on the same terms as their contemporaries – that is
they would have access to it at 18 and there would be no
restrictions on spending – a specifically tailored care leavers
trust fund could be different. The most appropriate age of access
to the fund could be older and some form of control over
expenditure could be introduced. These are important questions,
requiring further research and thought.

The advantages of this policy seem clear. A fund that
complements existing support and is additional to the CTF would be
a powerful tool in enhancing the opportunities of some of society’s
most disadvantaged people.

As the corporate guardian of children in care, the state has a
duty to provide what should be expected from a reasonable parent.
Providing a financial asset would represent a fuller and more
enabling interpretation of the rights of young care leavers, and
would play an important part in improving their life chances.