A new online petition has been launched calling for Child Trust Funds and Junior ISAs (Individual Savings Accounts) to be merged.
Junior ISAs were launched last week and are available to any child under the age of 18, who is a UK resident and who does not already have a Child Trust Fund (CTF). The Junior ISA is a tax efficient savings product which, like the adult version, can invest in Cash or shares. The maximum annual contribution is £3,600, which can be made by children themselves, their parents, grandparents, guardians and friends.
If a child already has a CTF they cannot open a Junior ISA and some experts are concerned that CTFs will become the poor relation to Junior ISAs with lower interest rates and higher charges.
The new e-petition calls for the new Junior ISA to be merged with CTFs leaving one tax efficient savings product aimed at children and avoiding the possibility of a two tier savings industry for children.
Now that CTFs can no longer be opened some parents and financial experts argue that attention will shift to the Junior ISA meaning those with CTFs will be left with poorer interest rates on their savings and potentially higher charges if they invest in funds via their CTF.
The e-petition says: “Around five million, children born between 2002 and 2011, are about to be subjected to a form of discrimination which affects their human rights: they will be the only British citizens not allowed to invest in an ISA. Instead they will be tied to the Child Trust Fund already opened on their behalf. These have not performed well in the past, and are likely to perform even more badly now new Trust Funds can no longer be opened.
The petition continues “This gives negative messages about saving to the millions of parents and grandparents who, in many cases, will have struggled to put this money aside for a child’s future. What effect it will have on the attitudes of five million children? They will grow into adulthood knowing that they are members of a small group, actively discriminated against by the government of their own country, facing financial losses as a consequence. This petition asks for a parliamentary debate to allow these children their rights by merging CTFs with the new Junior ISA.”
The petition can be found here.
Lower interest rates
There already seems to be some evidence to support this theory, especially when it comes to Junior Cash ISAs.
The Nationwide Building Society, who launched their Junior Cash ISA on 1st November, offer an interest rate of 2.1% gross AER on their CTF, however their Junior Cash ISA product pays 3.00% gross AER if you include the bonus of 0.9% for the first two years.
The Skipton Building Society also launched their Junior Cash ISA last week and offers the same 3.00% gross AER rate, although unlike the Nationwide account this does not include a bonus. However, the CTF offered by the Skipton pays a lower rate at 2.65%.
If the trend of lower interest rates being paid on CTFs continues the calls for the two types of accounts to be merged will no doubt grow louder.