Money held in Child Trust Funds (CTFs) can now finally be moved into Junior Isas (Jisas) – a move that could benefit more than 6m children.
Having been left out of December’s Autumn Statement, the government has said the move will allow current holders of CTFs to get better returns, pay lower charges and have more choice by moving into a Jisa.
According to government figures, as of 19 November, the best interest rate available for a CTF was 3 per cent, while for a Jisa it was 6 per cent. There are currently 6.1m CTFs holding £5bn in deposits, and all will be available to make the transfer from April 2015. The announcement follows a public consultation on whether CTFs should be transferred.
But how has the industry reacted to the much anticipated announcement?
Ian Sayers, director general of the Association of Investment Companies (AIC) said, “This long-awaited announcement is a boost for consumer choice and ends a two-tier system for children’s saving. Many CTF investors have found themselves ‘locked’ into a product because there are few alternatives but now they will have the freedom to invest in a far wider range of vehicles.
Darius McDermott, managing director of Chelsea Financial Services said the announcement is “great news”, however the date for transfers is too long away. “I can’t understand why there needs to be further delays and would have hoped the changes could be made this April instead. We’ve clearly got some further campaigning to do in the new year.
“I don’t see why a child’s date of birth should stop them getting the best deals for their financial future – and they should be getting them today, not in over a year’s time,” he added.
Although it may be some time away, the time can be put to good use. Rebecca O’Keeffe, head of investment at Interactive Investor said, “This is an opportunity for savers to review their products and check they are getting the best deal possible.”