Disabled teenagers locked out of Child Trust Funds

18th November 2020

  • Child Trust Funds were set up by the government to encourage parents to save for their child’s future. The savings pots could now be worth up to £1,500, or more if parents added contributions.

    Children born from September 2002 were given vouchers worth £250 in their first year and another £250 at the age of 7. For lower-income families, the payment was £500. Children receiving Disability Living Allowance were given an extra payment of £100 or £200 in 2010/11. The money was invested in tax-free accounts that parents, family and friends could also contribute to.

    Around 6.3 million young people should benefit from this saving scheme, with the first funds starting to pay out from September this year. However, it is estimated that around 180,000 severely disabled teenagers will not be able access their money.

    The money in the Child Trust Fund belongs to the child and can only be taken out by them once they reach the age of 18. But some young people will not have the mental capacity to make this sort of financial decision and will not be able to access their savings. For their families, the only way of accessing the money is by applying to the Court of Protection to become a financial deputy. The application process is difficult and expensive. The court fees alone are almost £400 and there may been other hidden costs, such as having to pay for a mental capacity assessment. Families may need the help of a solicitor which will add to the expense. For some, the cost of applying to the court may be more than what is in the trust fund.

    Parents across the country have been contacting their MPs to highlight this problem and Sir Ed Davey from the Liberal Democrats raised the issue at Prime Minister’s questions. Finance industry trade bodies have also sent proposals to the government that would allow the fund managers to release the money to parents, but there is no news of progress on this issue yet.

    Child Trusts Funds were scrapped in 2011, but it is thought that the same problems may apply to the current Junior ISAs. If you think that your child may not be able to manage their savings or have the capacity to give you Power of Attorney when they are an adult, then you should seek financial advice before investing in savings products that lock money in until they are 18.

    For more information on Child Trust Funds, including links to organisations that can help you track down lost funds, see this BBC news article.