Thanks to legislation introduced this April, 2014 which follows a consultation by HM Treasury, from April, 2015, parents of some six million children with savings in Child Trust Funds (CTFs) will now be able to convert their CTFs to Junior ISAs.
Up until now, the government has blocked parents from transferring money from CTFs into Junior ISAs, trapping these young savers into accounts with very poor, uncompetitive rates as compared to ISAs. For example, the best interest rate on a CTF is around 3% as compared to 6% on a Junior ISA.
What this essentially means is that children will have access to a much better choice of products, offering better savings rates for a greater return on their investment. They will also pay lower charges.
Financial experts have hailed this as ‘great news’ for child savers.
CTFs were introduced by the Labour Government in 2005 when 1 million children born between September, 2002 and January, 2011 were given vouchers of £250 each by the government to kick-start their savings.
However, the Coalition government scrapped them in 2011. As a result, and as quoted by Danny Cox of investment firm Hargreaves Lansdowne, “Child trust funds have been in terminal decline since 2011, seeing millions trapped in expensive products.”
The current advice given to parents is to carry on saving in CTFs until April 2015 when they can then be converted into Junior ISAs.
More information about Child Trust Funds and the new legislation can be found on the government’s website at www.gov.uk.
This article is intended for general information purposes only and shall not be deemed to be, or constitute legal advice. Newnham & Jordan Solicitors cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article or any external articles it may refer or link to.