28 February 2023

Government rejects small payments scheme idea to tackle account access issues

28 February 2023

The Government has decided against developing a scheme that could have allowed the parents of teenagers who lack mental capacity to access small payments from child trust funds without going through certain legal processes.

Concerns have particularly focused around parents wanting to access matured child trust fund (CTF) accounts belonging to young adults who lack mental capacity.

The Government explored whether there was a case for an alternative process for authorising the release of small payments from a range of cash-based accounts to suitable recipients, and, if so, what such a process could look like.

A previous Ministry of Justice consultation on small payments considered this proposal. Under the proposals, payments up to a total sum of £2,500 may have been allowed.

The Government said that, through the consultation responses, it became clear that the lack of access to small payments has arisen due to issues with operational requirements in the current court application process and a lack of awareness of the Mental Capacity Act.

This will be frustrating for the parents of teenagers who are locked out of their child trust funds

The Government added: “The Ministry of Justice will focus on addressing the key barriers to accessing payments, and not seek to develop a small payments scheme”.

It said that focusing on the application process to make it easier to complete and raising awareness of the Mental Capacity Act will address the root cause of the problem.

The Ministry of Justice will now embark on a programme of awareness raising and will engage with other Government departments, financial service providers and charities so that people are aware of the need to obtain legal authority for adults lacking capacity, and in the case of 16 to 17-year-olds who lack capacity, to do so in good time before they reach 18.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “This will be frustrating for the parents of teenagers who are locked out of their child trust funds.”

She added: “If you’re in this position, it’s worth checking with the organisation that holds the assets.

“At the moment financial institutions can make their own decisions to release small sums where there is an urgent need, so there may be a simpler approach on offer after all.”

The consultation found that a small payments scheme could introduce serious safeguarding concerns and risk the finances of vulnerable people while failing to address underlying issues with the existing processes. It would also take a significant amount of time to implement, including changing primary legislation, limiting how quickly families could be supported.

Justice Minister Mike Freer said: “I understand how frustrating parents have found trying to access these savings accounts while looking after children with disabilities and severe learning difficulties.

“Our consultation has exposed, however, that a new scheme would be just as complex to set up and navigate and may put the finances of those we all want to protect at greater risk.

“Instead, simplifying the current system is already ensuring that families can access the money they have saved quicker while maintaining the vital safeguards that prevent abuse and fraud.”

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