5th December 2013
Hargreaves Lansdown is warning the Government that a failure to merge the Child Trust fund and Junior Isa regimes risks disadvantaging six million children. The firm warns that the CTF is in terminal decline. Providers in the market are offering lower rates and worse choice but without Government action they cannot move their cash into the more competitive Junior Isa regime.
The Government has missed another opportunity to bring simplicity to saving and investing for children because there was no announcement in the Autumn statement about combining the Child Trust Funds and Junior ISAs regimes.
Hargreaves Lansdown head of financial planning Danny Cox says: “The consultation ended in August and without a change in the rules to allow transfers from CTFs to Junior ISA, over 6 million children with CTFs risk being disadvantaged. Running two separate schemes adds complexity and doesn’t encourage a savings culture. Unfortunately the Child Trust Fund (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 6 million children with CTFs”.
There are 6.141 million children with CTF accounts from 72 Child Trust Fund providers as at April 2012 with a market value £4,893 million, an average of £780 per account (as at April 2012) – 79% are stakeholder accounts.
1.296 million CTFs (21%) have additional contributions by family and friends.
According to Gov.uk there are 72 CTF providers:
28 Credit Unions
14 Friendly Societies
17 Building Societies or Banks
7 Investment Company providers (e.g. F&C)
6 Stockbrokers (offering self-select)
Junior ISA stats
Market value of Junior ISA September 2013 (HMRC)
Stocks and Shares Junior ISA £167 million
Cash Junior ISA
366,000 accounts opened (1st Nov to 6th April 2013)
Average subscription (2012/13) £1,327
New analysis of the Junior ISA market on its second anniversary has revealed that just 1% of children who reached age 18 have chosen to cash in their Junior ISA and take the money. What’s more, a third of them have chosen to top up their ISA with their own contributions.
Cox says: “This research shows that if you show children how to be a responsible investor, the vast majority of them do the right thing. Instilling good financial habits at an early age sets children on the right road to long term financial security. Our analysis shows that the current system where CTFs are cashed in and not converted to adult ISA at age 18 goes against what people actually want to do with their money”.