How has the market taken to Junior Isas?
Well, several offerings in the direct to client market have been quick to launch but it is fair to say that developments have been slower in the adviser market. What are the main reasons for this?
First, it is an unfortunate fact that the Junior Isa has been launched smack bang in the middle of the lead-up to the retail distribution review. The development teams of many platforms and providers are focusing on being RDR-ready and resources are only likely to be diverted where there is a feeling that there will be a significant return on the work undertaken.
This is where the other main issue arises. The annual subscription limit of £3600 is reasonable but it is not going to get the adrenalin flowing when it comes to providers who are focused on increasing assets under management. Couple this with a huge swathe of children not being eligible to open a Junior Isa and you get a taste for why the market has been slow to develop.
Given this, it has not been surprising to see a great deal of support for a change in the rule which prohibits transfers from CTFs. Most CTFs will not be huge in size but allowing the funds to be transferred, and CTF-eligible children to open Junior Isas will significantly expand the potential market. It will also help to allay concerns that the closure of CTFs to new entrants will lead to financial discrimination within families, with the Junior Isa eligible child having access to wider funds ranges and better interest rates than the child who is eligible for the “zombie” CTF.
Adviser platforms will no doubt be taking an interest in how the new kid on the block performs this Isa season.
Gareth James is technical marketing manager of AJ Bell