Government announces child trust fund changes

Government announces child trust fund changes

The government is to allow the parents of children who lack the mental capacity to legally manage their money access up to £2,500 of any funds held in Child Trust Funds or Junior Isas without having to go to court. 

Child Trust Funds were introduced in January 2005, with children born on or after September 1, 2002, eligible. They were closed to new accounts in 2011 and replaced by Junior Isas. 

Individuals who still have an account can continue to place cash into them, to a maximum of £9,000 a year, which can then be accessed when the child turns 18. 

But if the account holder is not classed as legally able to manage their money they or their parents have been struggling to access the funds.

As FTAdviser previously reported, under the existing rules, cash in a child trust fund is legally the property of the child. If the parent wants to access the funds, they must seek an order from the Court of Protection, a process which involves hiring legal representation and extensive paperwork. 

For smaller amounts of money, the cost of the court visit could exceed the amount held in the Child Trust Fund.

But in a recent announcement, lord chancellor Dominic Raab confirmed that parents or guardians can now access £2,500 of the funds without needing to go to court. The money can be withdrawn over a six-month period. 

In a statement Raab, who is also secretary of state for Justice and deputy prime minister said: “I’m determined to reduce the obstacles families and guardians face when they are supporting vulnerable people who lack mental capacity.

"These plans will make it easier and less stressful to access small funds while maintaining vital safeguards to prevent abuse and fraud.”

But opposition MP Ed Davey, who has a son who lacks mental capacity and will never be able to manage his own finances, and has a child trust fund, said the measures were not sufficient. 

Davey said: “It will be a huge relief to thousands of parents like me, who can now look forward to their children having some money of their own without having to go to the court of protection.

"However the government’s proposed cap of £2,500 is very low, it should be raised to £5,000 so that it doesn’t block people from accessing thousands of pounds of their own money.”