As many as 200,000 disabled children over the next eight years could potentially lose access to their Child Trust Funds unless their families pay hundreds or even thousands of pounds in court costs.
Campaigners, Child Trust Fund and Junior Isa suppliers and trade organizations are in talks with the government to find a solution to a nearly 20-year-old time bomb that is starting to detonate families and their vulnerable children.
Children with mental and physical disabilities who depend on their parents to handle their money do not have the capacity to do this themselves, preventing them from accessing their Child Trust Fund’s savings when they turn 18.
As many as 200,000 children would not be able to access their Child Trust Fund savings without a court order due to a problem with the way savings accounts are designed
But because the money is theirs, their parents or guardians cannot access it either unless they get an order from the Court of Protection to let them manage the money on behalf of their child.
The court filing can cost £ 365 plus up to £ 2,500 in attorney’s fees, which in many cases will offset more than the amount saved in a CTF, with the UK’s largest provider OneFamily saying the average amount has run out bills £ 2,100.
The government and CTF providers emphasize that the procedures are necessary to protect vulnerable children from exploitation by unscrupulous people trying to access their money and to maintain their legal rights.
But the lawyer who has been campaigning for a change in law since 2016 said the risk of abuse was “ small, ” largely because parents were saving their own money on behalf of their child for 18 years and were trusted by the Department for Work and Pensions to see the benefits of their child. child to manage.
Philip Warford, the general manager of Renaissance Legal law firm, said the problems faced by as many as 200,000 of the 6.3 million Child Trust Fund holders date back to the launch of the accounts in 2005.
The savings accounts were launched by then Chancellor Gordon Brown, with children born between September 2002 and January 2011 receiving a voucher of up to £ 500 from the government, and parents encouraged to contribute as well.
More than 700,000 teens will receive the keys to their Child Trust Funds over the next 12 months.
But Mr Warford said it was never made clear to parents that disabled children at the age of 18 would not have access to the money due to their lack of mental capacity.
My son James would love to buy a new custom bike with his savings, but as the scheme has no process to resolve mental capacity issues, he will be completely denied access to his account in September.
Andrew Turner, from West Sussex, signed up The Guardian In late August, his disabled son James, who would be one of the trust fund’s first teens to turn 18, would be blocked from access to the funds.
He wrote: ‘He would like to buy a new custom bike with his savings, but because the scheme has no process to resolve mental capacity problems, he will be completely denied access to his account in September.
‘We are then faced with the costs and delay of a request to the protection judge on his behalf. Given the delays in the legal system due to the coronavirus, we are told it could take up to a year to get this approval.
In 2005, the government offered parents additional incentives to invest in a trust fund for children if they were claiming disability livelihoods.
As of September, many of these disabled youths may not receive any benefits from their savings if they depend on their parents for financial help.
“The prospect of initiating formal legal proceedings, in addition to the challenges of supporting a disabled youth, will be daunting for many families.”
A petition started by Philip Warford’s Renaissance Legal law firm has just under 4,500 signatures. Since the problem of disabled children’s trust funds was aroused on TV in late August, interest has risen
The same problems are currently affecting the 954,000 Junior Isas holders when they are disabled and unable to handle money.
Mr Warford told This is Money that he believed there was an easy way to fix the problem by modifying an existing procedure that would give parents of children less than six months old to access the money. provided they receive confirmation from a medical professional.
He said the Child Trust Fund’s regulations “ need to be adapted to cover severe disabilities ” in cases “ where a person is not considered incapable of managing a bank account for himself ”, making the money accessible before a child turns 18. .
As talks between trade organizations and the government on change continue, Mr Turner told This is Money that it was’ disappointing that nothing has changed in so many years’, even if he ‘remained hopeful that a new trial will be agreed soon. for both CTF’s and Junior Isas’.
Jon Lee, Head of Investments at OneFamily, which is responsible for about a quarter of all Child Trust Funds, said: “ We believe this is a major issue that needs to be urgently addressed to ensure that all teens have equal access to it. full balance. of their child trust funds.
“I am pleased that our industry associations – TISA, the Building Societies Association and UK Finance – are working with the Department of Justice to create new industry guidelines that could potentially help many families.
‘Everyone involved wants this situation to be resolved as soon as possible; but we haven’t promised timing yet.
In the meantime, we will continue to look at each case with sensitivity and compassion. Everyone’s situation is different, so in certain circumstances it may be possible to free up money if sufficient ID can be provided by the person responsible for managing the young person’s finances.
“We encourage customers in this position to contact us so we can assess what support they need.”
A spokesperson for the UK Finance trade organization said: ‘We are working with the government and other trade organizations to strike the right balance between ensuring that all children who own a Child Trust Fund have access to it, with appropriate protection designed to help more vulnerable young adults as they become eligible to access their funds. ‘
But in the meantime, the government has continued to push for families to go through the expensive and time-consuming process of filing an application with the Court of Protection.
With as many as 200,000 children trapped in the problem, Warford said this could result in as many as 25,000 children a year going to court in the next eight years.
HMRC also told The Telegraph in March of this year that ‘funds could be accessed if there is a power of attorney’, a position Mr Warford described as ‘utterly absurd’.
He told This is Money: ‘It’s a red herring all the way. A power of attorney is something that you give. I can give it to you and you can give it to me. It’s not something you can take from me unilaterally.
‘To be able to give it to you, I have to be 18 and have relatively high mental capacity. If I had that high capacity I would be able to manage my CTF so the access issue is not up for discussion. ‘
The Justice Department insisted on This is Money. There were cases where a child who did not have the capacity to withdraw the money from the Child Trust Fund still had the opportunity to obtain a power of attorney.
A spokesperson said, “The requirement that a parent or guardian have legal power of attorney or an order from the Court of Protection is critical to ensuring that vulnerable people are not exploited.”
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