The Closure of Trust Accounts: A Looming Crisis for Vulnerable Communities

The financial independence and security of disabled people are under threat as high street banks and building societies withdraw trust accounts, a service critical for managing their money safely. This alarming trend is leaving some of society's most vulnerable individuals and their families grappling with uncertainty and potential hardship.

The Importance of Trust Accounts

Trust accounts are specifically designed to safeguard the assets of individuals who are unable to manage their own finances. They allow appointed trustees to administer funds on behalf of beneficiaries, ensuring stability and protection against financial abuse.

Moreover, assets held in a trust account are exempt from means-testing for benefits and are eligible for tax relief, making them a lifeline for many families. However, since COVID-19, most major banks have stopped offering trust accounts, citing high costs and compliance challenges.

Real-Life Impact: Frozen Funds and Hardship

The repercussions of this withdrawal are devastating. Nationwide Building Society, one of the last major providers, recently announced the closure of its trust account service, blocking many accounts pending closure. This has left families unable to access funds critical for daily essentials and support.

Take the case of James Trotman, who faced the heartbreaking reality of cancelling Christmas plans for his disabled son after Nationwide froze the £28,000 in his son's trust account. Despite submitting all the requested paperwork, the family endured weeks of delays before accessing their funds.

Another family found themselves unable to replace a broken laptop essential for care due to similar account restrictions. These stories underscore the severe consequences of trust account closures, leaving families feeling unsupported and adrift.

A Shrinking Pool of Options

As the trust account market dwindles, families are left with limited alternatives. Metro Bank remains the only high street provider offering trust accounts, albeit with a £5 monthly fee for balances below £25,000. Cater Allen, a private banking arm of Santander, also provides trust accounts, but access is restricted to referrals via solicitors or financial advisers.

This lack of accessible options disproportionately impacts individuals with complex or additional needs, who often rely on trustees to manage their financial affairs securely.

The Call for Regulatory Action

Campaigners and legal experts are urging regulators to step in. The Financial Conduct Authority (FCA) acknowledges the issue but emphasises that banks can choose which products they offer. While the FCA has engaged with disability charities and account providers, meaningful solutions remain elusive.

As a financial planner, this issue strikes a particularly personal chord because the cornerstone of my work is to ensure that every client, especially the most vulnerable, has access to secure and reliable financial solutions. Recent regulations, such as the Consumer Duty introduced by the Financial Conduct Authority (FCA), place a heightened emphasis on protecting vulnerable clients and ensuring fair outcomes for all consumers.

The closure of trust accounts is more than an administrative inconvenience, it’s a direct threat to the financial security and dignity of disabled people. Without viable alternatives, families face an increased risk of financial exclusion and abuse.

To address this crisis, a concerted effort is needed. Regulators must provide clear directives to banks, ensuring that vulnerable individuals are not left without essential financial services. Banks, in turn, should prioritise accessibility and compliance solutions over profit margins.

The withdrawal of trust accounts highlights the urgent need for a more inclusive financial system. Vulnerable individuals and their families deserve not only protection but also the confidence that their financial future is secure. Anything less is unacceptable.

𝗣𝗹𝗲𝗮𝘀𝗲 𝗻𝗼𝘁𝗲 - This article is for general information only and does not constitute advice. The information is aimed at retail clients only.