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Tory and Labour peers put forward plan to fix Child Trust Fund lockout

An industry-devised workaround to allow the parents of disabled children access to otherwise-locked Child Trust Fund and Junior Isa savings without having to go to court could be given legal backing under proposals put forward by peers.

Former Tory cabinet minister Lord Young and Labour’s Lord Blunkett have proposed an amendment to the Financial Services Bill which would enable child savings of up to £5,000 to be paid out to parents or guardians provided they can fill in a five-page form and get approval from a medical practitioner.

The amendment, which will be debated on Monday, comes as peers across all parties have grown increasingly frustrated with the Government’s seeming inaction on a problem which has already affected 8,000 disabled 18-year-olds since September 2020 and could affect as many as 160,000, according to savings industry estimates.

Conservative peer Lord Young and his Labour counterpart David Blankett have proposed an amendment which would make it easier for parents to access disabled Child Trust Fund cash 

Lord Young told This is Money he ‘hadn’t seen any progress’ from a working group set up by the Government last December to look at ways of enabling access to locked trust funds without parents having to go to the Court of Protection.

Severely disabled children without the mental capacity to manage money are unable to hold a bank account, but Child Trust Funds and Junior Isas are automatically transferred into their name at 18, effectively locking away the money.

Parents have to go through the courts in order to get access to the money on the child’s behalf, despite the fact many are already allowed to manage their benefits.

Although the Government waived Court of Protection fees in December, parents still face up to 59 pages of forms as well accompanying solicitors fees and up to a year of waiting if they want to get at the money.

And hopes for a solution from the Government also appear to have been dashed by comments from Justice minister Lord Wolfson in Parliament last month which suggested it was a matter for the Court of Protection and its rules committee.

While he said the court planned to look at its application process, the next meeting only takes place at the end of April.

Justice minister Lord Wolfson told peers last month the problem of locked Child Trust Funds was a matter for the courts to fix, not the Government

Justice minister Lord Wolfson told peers last month the problem of locked Child Trust Funds was a matter for the courts to fix, not the Government

As a result, the Conservative and Labour peers have proposed to pass into legislation an alternative process devised by The Investing and Savings Alliance, which represents Child Trust Fund providers.

It has been designed to make it easier for parents of those children with £5,000 or less in their trust funds, which covers 80 per cent of holders, to unlock the funds.

TISA’s Nigel Banfield said: ‘Parents and guardians of these young adults will be able to access the savings by filling out a five-page application form and getting a medical practitioner to fill out a one-page document.

This process cuts out a huge amount of time, unnecessary paperwork and complex legalities in comparison to the current Court of Protection route yet offers similar safeguards against adequate abuse.

‘This process cuts out a huge amount of time, unnecessary paperwork and complex legalities in comparison to the current Court of Protection route yet offers similar safeguards against adequate abuse.’

However the Government has refused to confirm that it complies with the 2005 Mental Capacity Act, which is designed to protect disabled and vulnerable children. 

It has insisted any changes cannot reduce safeguards created by the act.

Instead, the proposed amendment states ‘a body making a payment may not by making it incur any liability to the person who would otherwise be entitled to receive it’, which would be the child whose money it is but who cannot access it.

Lord Young said: ‘What the Government said is we need to change the law, but what I have discovered is we can do that using an existing bill.’

The former Tory Treasury minister described the amendment as ‘essential’ and added: ‘My amendment is based on recommendations from the Law Commission and I hope the Government will respond sympathetically.’

Get in touch: 

Are you the parent of a disabled child unable to access their Child Trust Fund or Junior Isa?

Get in touch: George.nixon@thisismoney.co.uk

He told This is Money he hoped the Government would accept the proposals and agree to amend the bill and the Mental Capacity Act themselves.

Philip Warford, the managing director of Renaissance Legal, which has campaigned to change the law on Child Trust Fund access since 2016, said he ‘wholeheartedly’ supported the proposed amendment.

However, he warned it ‘would not solve the problem for everyone’ and the £5,000 cut-off could create ‘an uneven playing field’ which would lead to some families still having to go to the Court of Protection.

A Government spokesperson said: ‘The Government wants to reduce the obstacles families face in supporting young people who lack mental capacity – including waiving fees to access these funds.

‘We continue to work with the judiciary and across government to improve this process further, making it more streamlined and accessible.’

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