Following on from our article on Junior ISA’s above, Chancellor George Osborne has recently made an announcement saying that the Government will allow millions of parents whose children have a child trust fund (CTF) to transfer the money to a Junior ISA which will almost certainly offer better value for money.
CTF’s were replaced by Junior ISAs in 2011, but up until this recent announcement the Government has blocked parents from transferring money between the two, with the result that there are an estimated 6 million CTFs earning an extremely poor rate of interest.
The new rules don’t come into effect until April 2015, so until that time there is little that holders of CTFs can do. The Chancellor was quoted as saying “The Government supports hardworking families who want to save for their children.” he said. “So I’m delighted that, as a result of these changes, over 6 million children who currently have savings in a child trust fund will be able to benefit from better returns and lower charges on those savings in the future.”
But why wait until 2015 when most industry experts expected a change to the rules to be brought in much earlier, indeed it was anticipated that the Chancellor’s Autumn Statement, made last year, would be used to announce the changes. What this means is that these 6 million plus CTFs will continue to pay a poor return for yet another year. Further criticism of the changes comes by the fact that transfer will not be automatic – leaving an estimated £5bn of funds earning interest rates that, in some cases, are around half of what can be earned in a Junior ISA.
So if you have a CTF then get the 06 April 2015 in your diary and make sure that you transfer to a Junior ISA as soon as you are allowed to do so.
Andrew Silk