HM Treasury reveals it will not force Junior Isa providers to match child trust fund providers’ low annual management charges.
In a 22-page consultation paper published earlier this month, HM Treasury predicts most CTF holders will not ditch the product for Junior Isas with greater AMCs.
Around three quarters of CTFs are stakeholder accounts, with features including ‘lifestyling’ of accounts after the account holder reaches the age of 13 and management fees that are capped at 1.5 per cent of the fund value.
These features do not form part of the statutory requirements for Junior Isa. HM Treasury has confirmed there will be no new requirement upon Junior Isa providers to offer stakeholder terms and conditions.
Therefore, the Treasury has warned that should funds held in a stakeholder CTF be transferred to a Junior Isa, these statutory requirements would no longer apply in relation to the funds and children’s savings could be hit with greater AMCs.
However the government did confirm it plans to allow CTF holders to push their nest egg into an Isa once they reach maturity.
Funds held in a Junior Isa can already be automatically rolled into an adult Isa on maturity, outside the normal Isa subscription limits.
While this is not currently the case for CTFs, the government intends to legislate, in good time before the first accounts mature, to provide that funds held in a CTF on maturity can remain tax advantaged after maturity, and may be rolled into an Isa outside the normal subscription limits – as is the case for Junior Isa funds.
For more details about the plans to allow CTFs to transfer to Junior Isas, click here to read FTAdviser’s Regulation Tracker summary of this consultation paper.
