Guest blog By Teddy Nyahasha, CEO of OneFamily
There’s some hope for the families of young adults who do not have the mental capacity to manage their financial affairs in the form of a Government consultation that has recently been launched.
This consultation is looking at the option of providing a small payments scheme that will help those young people with smaller balances to access their savings when they reach maturity without having to go to court. I would urge all providers of products that fall within the scope of this consultation (current accounts, savings accounts, children’s savings accounts, cash ISAs, e-money or retail investments) to provide a response before the consultation closes on 12 January 2022.
As the UK’s biggest child trust fund provider, holding over a quarter of the market, OneFamily has lobbied hard for this change. We became aware of the difficulties being faced by our customers as the first accounts came to maturity in 2020.
It’s estimated that 200,000 account holders could need extra support to withdraw their own money from their accounts. However, under the Mental Capacity Act (MCA) their parents or carers would be required to complete 59 pages of complex forms, source files of medical documentation and make an application to the Court of Protection just to access their children’s savings. It can be a stressful, costly and time-consuming process and only a tiny handful of people have accessed their accounts through this route.
It feels very unfair to insist that the families of these teens need to go to court to enable them to get at their own money simply because they lack mental capacity. It’s not inclusive and adds an extra layer of strain to the very families who could probably find the money helpful in supporting their child – whether that’s with IT equipment, mobility aids or even a family holiday to build some happy memories.
The MCA is there to protect the most vulnerable in society, no-one could possibly dispute that, and if we’re looking at large balances or perhaps big estates then the courts are absolutely the right route. However, where savings in children’s accounts are less than £5,000, it really does feel that we are currently punishing a minority severely for what is actually quite a small risk.
A number of child trust fund providers, including OneFamily, have already established a process, whereby they will release the savings against documentation that the parents or carers already have. This has meant that, at OneFamily, we’ve been able to help nearly 300 teens to access their money so far. But this process is not recognised by the Ministry of Justice.
So, the consultation is a huge step forward. It means that the Government has identified that this is a problem and that something needs to be done to help those without mental capacity to access their savings. It’s not just child trust fund holders that could be benefited by this scheme; the holders of other accounts such as Junior ISAs or ISAs could also find it easier to access their money.
So, what are my thoughts on the consultation? From the perspective of a child trust fund provider, enabling those affected customers with smaller balances to access their funds without having to go to court helps to rebalance the current inequality.
We want the scheme to work, so we’re keen to ensure that the process is simple for the applicant and for the industry to manage – it doesn’t need to have any difficult barriers to navigate because we want to make accessing the money easier for account holders. So, there’s a suggestion in the consultation that there would be a layering of proof of identity needed and an indication that referees might be required before the money is released. We would welcome a more flexible approach that recognises that people have different forms of identification available to them. Clearly, where the applicant is already an established named contact for an account or is the young person’s DWP appointee then there has already been a certain degree of background checks already made and this needs to be taken into consideration within the process.
We agree that there must be sufficient safeguards in place to protect these vulnerable teens and we are pleased to support this. However, we also don’t feel particularly comfortable with financial services firms being put in the position of having to ask for receipts or to know what families plan to spend the money on. We don’t think it’s our business to judge, we just want to ensure that it’s going to the right person and is being used to the benefit of the account holder.
Finally, in terms of who should foot the bill for this scheme, we recognise that a considerable amount of money and court time will be saved if the process is implemented since it will be undertaken by the financial services industry. So, we think that the costs should not be passed to the applicant, because this would effectively be a disability tax. Neither do we believe the costs should be borne by the financial services industry, who would actually be enabling the Ministry of Justice to save money by enacting the scheme.
Overall, we’re pleased that the Government has listened to the concerns that have been raised by the industry and the families of the young adults who have been most affected. This is potentially a positive change for the better that could be quickly and easily implemented.
The Mental Capacity Small Payments Scheme consultation closes on 12 January 2022.
OneFamily is the UK’s biggest child trust fund provider, holding over a quarter of the market.
The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.