Families could lose out on £300 million on children’s savingsPoor child trust fund rates cost kids millions

20 March 2012

Child with piggy bank

Children with money in a child trust fund could lose out on more than £300m

Children could miss out on more than £300 million in returns on savings over the next ten years due to government rules that prevent transfers from child trust funds (CTF) into Junior Isas, according to new Which? research.

We want the government to make sure the estimated £4.4 billion currently held in CTFs doesn't get trapped in poor-value savings products. We think families saving in CTFs should be allowed to transfer this money into higher-paying Junior Isas.

Junior Isas pay more than child trust funds

Which? found that the average Junior Isa is paying a fifth more interest than the average CTF. A Nationwide CTF, for example, pays just 1.1% a year compared with its 3% Junior Isa, which pays 2.1% and a 0.9% first-year bonus.

Even worse, the best CTF rate, of 3% from Yorkshire Building Society, has a 0.7% bonus which disappears after the first year. By contrast, the best Junior Isas are paying 3.02%, with no strings attached.

Even if the difference in the annual rate of return between CTFs and Junior Isas is just 0.5% a year, children with CTFs could miss out on more than £300 million in interest over the next ten years.

Which? wants CTFs to be able to transfer into Junior Isas

Which? chief executive, Peter Vicary-Smith, says: 'Junior Isas are a welcome addition to the savings market but it's vital that the government does not penalise those children who were born before these new savings products were introduced.

'The government must change the rules to allow savers to access the best rates available for children's savings regardless of when the child was born.'

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