Child trust funds were launched in January 2002, as long-term, tax-free savings account for children. The money belongs to the young person and they can only take it out when they turn 18. 6.3 million children in the UK born between September 2002 and January 2011 were eligible to receive vouchers from the Government to invest in the scheme. Families with children who had a disability were offered additional payments to make it more attractive for them to join the scheme and to compensate them for the additional costs that they would face. Unfortunately, no consideration was given to what would happen to any of those children if they lacked the mental capacity to manage their finances when they turned 18. The same also applies in relation to Junior ISAs, which replaced the child trust fund in 2011.
The first children with child trust funds started to turn 18 on 1 September 2020, and were hence eligible – now as adults – to access their funds. Where they have unimpaired decision-making capacity, no problems arise – they can both access and then manage their own monies. The problem arises where they do not. To date, it appears that about 7,000 CTFs are held by young adults aged 18 who lack mental capacity. Some 80% of these funds are for amounts of under £2,000.
A parent has no decision-making authority in relation to an adult child unless they have either been appointed a deputy by the Court of Protection or (once the adult child turns 18) they have been granted a Lasting Power of Attorney with relevant powers. In very many cases involving a (now) adult with impaired decision-making capacity seeking to access their CTF monies, the option of an LPA is simply not on the cards, leaving the Court of Protection as the last resort.
For a combination of reasons, and on the basis of information which does not always appear to be entirely accurate (which is, neutrally, surprising when some of it comes from those with legal expertise who should know better), a considerable head of steam has built up to seek to find ways in which to circumvent the need to go to the Court of Protection.
This culminated in a proposed amendment to the Financial Services Bill earlier this month (April 2021) which would, in essence, have enabled providers to enter into an agreement with someone to receive payments on behalf of the individual where there is medical evidence that person lacks capacity to manage their financial affairs, and where that recipient signed a form stating, inter alia, that they understands their duty to be apply the money they receive in the best interests of the person who would otherwise be entitled to it. The payment limit under any agreement could not exceed £5,000, and the proposed statutory provision was time-limited to 2 years. The amendment (37C), proposed by Lords Young, Blunkett and Addington can be seen here.
In the debate on 14 April 2021, Baroness Finlay in her speech (and in part wearing her hat as Chair of the National Mental Capacity Forum) made a number of important observations about the potential problems that the amendment posed, including the potential for abuse, and that the proposal made no provision for the situation where the person in question regained capacity. Lord True on behalf of the Government made clear that, whilst sympathetic to the problem, he could not accept the solution:
While I understand the intentions behind this amendment, we have real misgivings about this proposal, which is not compatible with the Mental Capacity Act. The Act upholds a long-established principle that legal authority is required to deal with the property of an adult who lacks mental capacity, through a lasting power of attorney or an order of the Court of Protection. This is a vital safeguard for the protection of vulnerable people and their assets; the noble Baroness, Lady Finlay, reminded us of that. We should not seek to bypass that Act in this Bill.
As with Baroness Finlay, Lord True also noted that
The amendment itself raises many concerns, as it extends far beyond giving parents and guardians access to matured child trust funds and junior ISAs and could enable third-party access to any bank or building society account.
Lord Young did not ultimately push the amendment to a vote, but observed that “if progress has not been sufficiently speedy, we will be back with the first possible legislative vehicle to press the issue again, having taken on board some of the reservations expressed during the course of this debate?”
Steps are being considered by the Court of Protection Rules Committee to consider what further measures can be taken to streamline applications in relation to adults who have CTF (or, in due course, Junior ISA) monies held. These are over and above the steps taken in December 2020 to clarify that (1) parents or guidance who apply to the court before their child’s 18th birthday already do not pay fees, unless the child has other substantial assets; and (2) that a fee remission is available where the application has not been made before the person turns 18.
The amendment proposed was said to be have been based upon recommendations from the Law Commission. This is undoubtedly correct, as it is possible to trace its lineage back to a proposal to be found in its 1995 Mental Capacity Report (see here at pages 54-56), but is vitally important, and perhaps rather underplayed by those proposing the amendment to Peers, to note that this was in the context of wider statutory scheme that the Law Commission was proposing which made other provisions in relation to financial affairs which were not taken forward. The Law Commission’s proposals were accepted “in principle” by the Government in its “Who Decides” Green Paper in 1997 (at paragraph 3.56), but that there “but there are a number of practical problems, including ensuring that there are adequate safeguards against abuse.” Having consulted, the Government considered in 1999 that it was “not convinced of the need for such a scheme. It considers that the extent of the problems that the scheme was intended to solve should be clarified, and that further consultation should take place on this issue, and on the appropriate safeguards for any scheme” (paragraph 1.34 of Making Decisions). The Draft Mental Incapacity Bill then introduced in 2003 did not include such a provision, and in pre-legislative scrutiny on the Bill, the primary concern expressed by the Joint Committee was not at the absence of such a provision (which was not mentioned), but rather that what is now s.5 MCA was open to abuse if and to the extent it gave authority in relation to financial matters, leading to a recommendation for a regulation-making power to exclude from the scope of what was then called the general authority “significant decisions concerning the management of an incapacitated person’s financial affairs,” thereby always requiring the involvement of the Court of Protection (see here at paras 121 and 129). That recommendation was not carried forward, but s.5 has to be read in conjunction with ss.7 and 8 which, in practice, substantially limits the statutory power of others to make use of the individual’s money, in circumstances where (1) it is clear (see para 6.63) that the MCA does not give a carer or care worker access to a person’s income or assets; and (2) there is no obvious basis for any authority at common law to do anything in relation to a person’s assets, which could include capital.
In the circumstances, primary legislation will definitely be required if recourse to the Court of Protection is not going to be required here, and it is irresponsible to suggest otherwise. It may well be that the CTF saga has thrown up a question as to whether the Law Commission’s proposals should be revisited; if they are, it may well be very useful to have a look across the border to Scotland and the statutory access to funds provisions in the Adults with Incapacity (Scotland) Act (see Part 3), which I understand are being brought into play to defuse the CTF time bomb in Scotland.
More broadly, it is impossible but to help observing that much of the debate here (both inside and outside Parliament) throws up – again – the fact that there is still deep discomfort on the part of many at the idea that parental responsibility legally stops at age 18 in the case of those with cognitive impairments, even if morally it may never end. That is a very, very much bigger issue, which challenges the very foundations of the Mental Capacity Act 2005 itself. It is also one that is going to require grappling with as the Liberty Protection Safeguards come into effect to address (in part) the consequences of the Supreme Court’s clear statement in Re D that even before 18 there are very clear legal limits to what parents, as parents, can seek to authorise.