Joint Committee on Statutory Instruments Eighteenth Report


Appendix 4

S.I. 2003/690: memorandum from the Lord Chancellor's Department

Public Trustees Fees (Amendment) Order 2003 (S.I. 2003/690)

23.  The Lord Chancellor's Department submits this memorandum in response to the request dated 1 April 2003 on the point set out below:

Explain the reasons for the fee increases made by this instrument.

Background

24.  The Public Trustee administers estates and trusts when appointed in wills and settlements or by a court. For many years after the office was established in 1906, it adopted an "open" policy, being prepared to accept almost any case in which a settlor or testator chose it to act. Increasingly, and certainly since the Lord Chancellor issued 'Making Changes: The Future of the Public Trust Office' in December 2000, it has adopted a more restrictive policy of accepting cases only on a "last resort" basis, where no suitable person or institution in the private sector is willing or able to act.

25.  The Public Trustee Act 1906 required fee arrangements to be made so that the Public Trustee recovered the full costs of his operation. The Public Trustee (Liability and Fees) Act 2002 removed this statutory requirement. However, the office remains subject to Treasury fees and charges principles. These require the Public Trustee to recover the full costs of his office subject to a public subsidy for genuine last resort work.

26.  Prior to the 2003 Order there had been no increases in the overall fees levied since 1994, although the balance between various fees was altered in 1999. Following the passing of the 2002 Act, the Public Trustee has embarked on a programme of fee increases, combined with cost reductions, with the aim of achieving full cost recovery (less the subsidy for last resort work) in accordance with Treasury fees and charges principles. For the financial year 2003/04 increases to fees (where scale fees are currently charged) will continue to be on the present basis of a scale charge linked to the capital value of the funds managed.

The Order

27.  The 2003 Order provides for increases in the rate of the annual administration fee, which accounts for 50% of the total income from trust fees. It also provides for increases in other miscellaneous fees. The aim of these increases is to bring fees more closely into line with the costs of doing the work, so far as is consistent with maintaining scale fees where these are applicable.

28.  In addition, it provides a reduced rate for calculating the withdrawal fees. These are payable when a trust is distributed, either wholly or partly, or when the Public Trustee retires. The previous rate of withdrawal fee is generally in excess of the cost of doing the work and has therefore been adjusted downwards. The Order also contains a broader power to remit fees. This will allow the Public Trustee to consider not only the nature and character of the estate, trust or other matter, but also the work conducted in respect of which the fee is charged and the potential impact of the fee upon a beneficiary or beneficiaries.

29.  These increases will halve the current shortfall between fee income received and the cost of providing the Public Trustee service. It is anticipated that next year there will be a further Fees Order, and this will introduce a new charging regime linking fees more directly to the costs of doing the work involved, which should largely replace scale fees.

April 2003


 
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