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Autumn Statement 2013: No mention of child trusts funds was a ‘missed opportunity’

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05/12/2013
The Chancellor "missed an opportunity" this morning by not confirming whether he would allow children who hold child trust funds (CTFs) to transfer their savings to new Junior ISAs.

George Osborne had been expected to clarify his position during the Autumn Statement after the government consultation on the possibility of letting children switch from CTFs to Junior ISAs ended in August.

If implemented, the move would throw a lifeline to millions of children between the ages of two and 11, who are stuck in expensive funds or are being kept on low interest rates.

Darius McDermott, managing director of Chelsea Financial Services said: “I don’t see why a child’s date of birth should stop them getting the best deals for their financial future. It seems incredibly unfair and the Chancellor has missed an opportunity to finally sort the mess out.

“The government asked for feedback, which they received back in August, and I don’t really see why they couldn’t make a decision in that time, especially when it’s such a no-brainer: Junior ISAs offer more choice, lower costs and better cash rates. As a consequence they are already attracting ten times as much investments. Let’s hope they see sense before the March Budget.”

Hargreaves Lansdown head of financial planning Danny Cox warned running two separate schemes adds complexity and doesn’t encourage the savings culture the government is hoping to achieve.

He said: “Unfortunately the CTF is in terminal decline with many providers offering lower rates and worse choice than is available from Junior ISA and the government needs to recognise this. A change to the rules would allow more and better choice and be great news for over six million children with CTFs.”

Junior ISAs replaced CTFs in late 2011 but savers were denied the opportunity to switch their funds to the new product.

Junior ISAs offer better rates and more flexibility to savers than CTFs, while giving access to a much larger range of funds.

According to government figures total Junior ISA funds now stand at £557m after the first full year for which they have been available.

Under 18s can save up to £3,720 a year tax-free in the accounts. A total of £392m was subscribed to 295,000 Junior ISA accounts in 2012-13, with an average subscription of 1,327 per account.

Children holding CTFs, who were not allowed to open a Junior ISA or switch their funds to one, were facing increasingly difficult conditions in the last two years.

The interest on CTFs could be as little as half that on Junior ISAs, while switching funds within CTFs could also prove expensive with fees of around 6% on some funds.

CTFs were given to children born between 1 September 2002 and 2 January 2011, who were given an initial £250 cheque from the government to be invested in a selection of cash savings accounts or funds.

 

 

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