Parents who hold savings accounts for their children could well be disappointed by the lack of news from today's Autumn Statement. It had been hoped that Chancellor George Osborne would allow child trust funds (CTFs) to be transferred to junior ISAs in order to benefit from the better rates that can be achieved, but unfortunately that announcement failed to materialise.
Moneyfacts strongly believes that Government should make CTF transfers possible to ensure children don't lose out, and in doing so can ensure we don't get a generation of young savers disillusioned with the savings process. Our very own Sylvia Waycot appeared on BBC Breakfast on Tuesday to discuss the issue prior to the Autumn Statement being announced – see what she had to say for some added insight into the matter.
Junior ISAs were introduced in November 2011 as a way for children to benefit from tax-free savings allowances, replacing the former CTF arrangement where the Government gave £250 to every child born to be put into savings. Junior ISAs don't get such Government intervention but do benefit from being free from tax, mimicking the adult version, and have grown in popularity with highly competitive rates being available.
But, that means many providers see CTFs as a second-tier product and therefore offer significantly lower rates. Those with existing CTFs haven't been able to transfer to a better value ISA either, meaning millions of children have been locked into poor-value accounts that no longer perform.
That's why it was hoped the Chancellor would allow plans to relax the current rules. But, he made no such declaration, and although the annual subscription limit has been increased for both products (from £3,720 to £3,840 in line with inflation) it's little consolation for many young savers and their parents.
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