The Court Funds Office’s (CFO) Special Account, which is used to fund lifetime specialist medical care, has been criticised for paying low interest rates and running the risk of leaving up to 140,000 people with inadequate means to fund their ongoing treatment.
Investec Wealth & Investment has said that the CFO account, which only pays 0.5% interest, is woefully short of current levels of inflation at 2.7% and will not generate the level of income required for a personal injury award to last a lifetime’s medical care and support.
The CFO, which provides banking and administration services, manages a total of £3.3 billion of assets. Investec has calculated that a £1 million award invested in the CFO Special Account – with £50,000 in today’s value drawn down annually for medical care and support – would run out in just 16 years.
Investec recommends that individuals (or their representatives) with funds in the CFO seek investment advice rather than leave all of their capital in the Special Account by default.
Richard Fullman, head of the personal injury and Court of Protection team, at Investec Wealth & Investment, said that leaving large sums of cash on deposit may seem like a risk-free option, but could have catastrophic consequences for lifetime awards, particularly when “capital is rapidly haemorrhaged” and the returns that need to be generated to get the portfolio back on track become “unfeasibly high”.
Fullman also said that claimants doing the opposite and taking investment matters into their own hands could be equally damaging to their awards. He pointed to a recent case involving one Miss Buckley, an elderly nursing home resident, whose niece had been appointed as her Lasting Power of Attorney (LPA) and had invested £90,000 of her aunt’s funds into a reptile-breeding venture, with no formal security of share of the investment returns.
“Sadly, no lifetime award investment portfolio can be entirely risk-free so it needs to be designed to minimise the effects of inflation, interest rate fluctuations, currency movements and volatility,” he said.
“The risks of getting it wrong can be devastating and result in parents and carers responsible for managing their dependents’ financial affairs facing tough decisions around cutting the costs of medical care and support.”
Many of the deposits at the CFO are made on behalf of children who have suffered from medical negligence at birth, individuals who have become mentally incapacitated through a road traffic accident, and elderly people suffering from dementia.