£2 billion in children’s savings is at risk of being left stranded in low paying accounts after the
Government banned Child Trust Fund holders from taking out the new Junior ISA. That’s the
concern of many financial experts who are concerned that providers will reduce the savings returns
for 5.6 million youngsters in favour of offering higher interest rates on new Junior ISAs.
Junior ISA not available to Child Trust Fund holders
The Government recently announced that from November parents will be able to save up to £3,000
per year for their child in a new tax-free savings account. However, the Daily Mail reports that ‘this
does not include any child born between September 1, 2002 and January 2, 2011, whose savings are
already tied up in a Child Trust Fund.’
Experts worried that returns on Child Trust Fund accounts will fall
When Child Trust Funds (CTFs) were launched there were forty investment funds to choose from,
compared to just 23 today. The newspaper reports that ‘the fear is that come January, when the
last Child Trust Fund voucher is invested, rates will suddenly plunge. With no incentive to look after
money that is locked away, experts fear Junior ISA savers will get the best deals while CTF savers will
be forgotten.’
James Daley, editor of Which? Money, says: “There will be no great incentive for providers to offer
best products for those people paying into CTFs. It would make perfect sense to allow people to
transfer their CTF into a Junior ISA.”
However, the Treasury has appeared to dismiss the prospect of merging Junior ISAs and CTFs. A
spokesman said: “While interest rates are a commercial matter for providers, we believe a sizeable
and competitive CTF market will continue once Junior ISAs are introduced.”
