Since Child Trust Funds (CTFs) were phased out in 2011, parents and the savings industry have lobbied the government to allow the money held in them to be transferred into the Junior ISAs that superseded them. The ISA market is seen as having far more choice and, where the money is held in a savings account, often offers better rates.
The dissatisfaction surrounding the current process stems from the fact that more than six million children with CTFs have been unable to access these apparently better products, under the current rules.
As announced by the Chancellor in the 2013 Budget, steps are now being taken to assess the situation further. The Treasury is currently involved in a consultation on allowing the transfer of savings from a CTF to a Junior ISA.
The purpose is to assess whether transfers should be allowed and then to settle on the proposed approach. When the consultation closes, the government will consider all responses and collate them into a published document.
To the delight of the savings industry and the parents who lobbied for the change, the government has recommended as part of the consultation that the current rules be relaxed so that parents can now opt to transfer their portion of the total £4.8bn now held in CTFs, to Junior ISAs.
The Treasury anticipates that many parents might still choose to keep the CTF rather than transferring it, meaning it would be necessary for providers to continue to offer competitive and alternative products to them.
CTFs were a Labour government initiative to promote saving and were available to children born between 1 September 2002 and 2 January 2011, with the government initially providing a starting voucher of £250. That was reduced to £50 as the accounts were phased out for new savers, before being replaced with Junior ISAs.
The Treasury appears to be seeking to support parents by ensuring that there are clear and simple ways to save for all children, stating within the consultation launch that at the present time the two tier system is unsatisfactory for those who have CTFs but want the wider choice of a Junior ISA.
The consultation runs until 6th August 2013 and HM Treasury is particularly interested to hear from: representative groups for children or savers and CTF holders, their parents or guardians.