Trump Accounts

Better financial education, better investment launchpads for life, share ownership for all

Should we be pressing for Starmer Accounts in the UK to rival Trump Accounts?

Every child born in the USA from 31 Dec 2024 receives $1,000 in a Trump Account, a tax-deferred (not exempt) investment which tracks the performance of a broad-based US stock market index. Parents and others can also contribute up to $5,000 a year into the account.

The Trump account will only invest in shares, not cash. The logic is that investing grows the economy and the power of compounding has a significant effect.

Michael Dell promised in the Oval Office to match the government’s $1,000 contribution for children of Dell employees. No doubt other companies will follow.

Trump Accounts mark out the US as an ownership-focussed society. Assuming an average contribution of $750 each year on top of the Government’s $1,000 seeding, combined with stock market growth, the investment could be $50k when the child is 18 and $175k at age 30, according to one speaker in the Oval Office. This equates to 12% per annum growth which has been achieved historically in some periods, but is out of line with consensus market assumptions for future growth which sit in the range 3% to 7% nominal (from which one subtracts say 2% for inflation to get a real figure of 1% to 5%). The returns quoted in the Oval Office were pre-tax on optimistic assumptions – it is unlikely people will net anything like the numbers quoted.

These amounts are significant enough for the next generation to experience directly the power of compounding and how stock markets work. The initiative will give US children a launchpad for starting their own businesses. At the launch event In the Oval Office, business leaders stressed how many of the big US companies were started in garages and bedrooms with seed capital.

Speaker Mike Johnson said: “If you have a 401(k) [a US self-managed pension] you understand the power of investing early for the future. Trump Accounts take that same principle and they apply it from the very beginning of Americans’ lives. … Trump Accounts are all about setting up the next generation for success.”

For more information, see:

https://www.whitehouse.gov/articles/2025/06/trump-accounts-will-chart-path-to-prosperity-for-a-generation-of-american-kids/

The Guardian also published a review, mentioning the UK Child Trust Fund and Singapore’s Baby Bonus Scheme:

https://www.theguardian.com/us-news/2025/jun/09/trump-funded-accounts-babies

This 53-minute YouTube video is also worth listening to:

https://www.youtube.com/watch?v=jnjoohMhBIA

The Starmer Account (or, less narcisistically, the Starter Account! Or Rachel Reeve’s Growth Account. If you have a better name, feel free to add a comment below) could be an improved version of Gordon Brown’s Child Trust Fund, investing only in the UK. With ~600,000 children born in the UK each year, the annual cost would be a relatively modest £600m assuming a £1,000 per child government contribution.

Making the tax breaks on Starter Accounts, ISAs and even pensions contingent on a minimum allocation to the UK market would, in my view, be eminently sensible if it can assist in creating wealth for future generations.

Footnote: for those interested in the details here is a summary by Google Gemini of the relevant bits of the Great Big Beautiful Bill about Trump Accounts.

You will eventually pay tax on the growth. The idea is that you benefit from the compounding over many years, and you pay the tax when it’s most advantageous for you.

Common examples of tax-deferred accounts in many countries are retirement accounts (like pensions in the UK, or 401(k)s and IRAs in the US) or certain investment products like bonds.

“Trump Accounts” in Practice: Summarising the “Great Big Beautiful Bill” 

Based on the recent White House announcement on June 9, 2025, the “Trump Accounts” are a new provision within a larger piece of legislation called the “One Big Beautiful Bill.” 

Here’s a summary of how they are described to work: 

• Purpose: To encourage saving and long-term wealth building for American children, giving them a “financial head start.” 

• Eligibility: For all newborn American children, specifically those born between 2025 and 2028, who are US citizens with Social Security numbers for both parents and the child. They are automatically enrolled. 

• Initial Deposit: A one-time government contribution of $1,000 into each account. 

• Additional Contributions: Private contributions of up to $5,000 per year are allowed. It’s stated that these are “after-tax” contributions, meaning you don’t get a tax deduction for putting the money in. 

• Investment Growth: The savings are allowed to grow tax-deferred. This means that any investment gains (like capital gains, dividends, or interest) within the account are not taxed until withdrawals are made. 

• Withdrawals and Taxation: 

• • Partial Access: Withdrawals are allowed from half of the account once the account owner turns 18. 

• • Full Access: The full account can be accessed once the account owner turns 25. 

• • Mandatory Withdrawal: The remaining balance must be treated as withdrawn and taxed accordingly when the account owner turns 31. 

• • Qualified Expenditures: If withdrawals are made for specific “qualified expenditures,” the withdrawal (net of initial contributions) will be taxed at the long-term capital gains tax rate, which is typically lower than ordinary income tax rates. The qualified expenditures mentioned are: 

• • • College tuition or credentialing expenses 

• • • Small business expenditures 

• • • First-time home purchases 

• • Non-Qualified Withdrawals: If the money is used for any other reason, withdrawals (net of contributions) face the higher individual income tax rate. 

• Account Ownership: The accounts will be the private property of the child’s guardian (initially). 

• Investment Strategy: The accounts will track a stock index. 

In essence, for “Trump Accounts”: 

• You don’t get a tax break for putting money into the account. 

• Your money grows without being taxed annually. 

• You pay tax when you take the money out, and the tax rate depends on what you use the money for and when you withdraw it. Qualified uses get a lower capital gains tax rate, while other uses get the higher income tax rate. There’s also a deadline to withdraw the money (age 31). 

It’s a form of “tax-advantaged” savings account, similar in concept to some existing US savings vehicles, but with its own specific rules and limitations. 

Cliff Weight, Member of ShareSoc and member of ShareSoc Education and Policy Committees

This article reflects the opinions of its author and not necessarily those of ShareSoc. Comments provided by AI may not be accurate. Always check your sources.