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Child Trust Fund holders may lose £300 million over next 10 years

Six million children locked into CTFs

Which? is calling on the government to allow Child Trust Fund (CTF) policyholders to transfer to Junior Isas, which have higher interest rates and lower charges.

The government is currently consulting on whether or not to allow families to transfer savings held in CTFs to Junior Isas. Which? wants families to be allowed to voluntarily move their money across.

Poor deal on CTFs

CTFs pay lower interest rates and operate higher charges than Junior Isas. For cash accounts, Junior Isas pay 0.5% more than CTFs. Over the next ten years, this could mean a shortfall of £52m for cash CTFs, based on HMRC assumptions. Our guide to Child Trust Funds has more information on their rates and how they work.

For stakeholder accounts, charges on CTFs are 0.5% higher than those on Junior Isas. 

Based on assumptions made by the financial regulator and HMRC, Which? calculated that after 10 years, the amount saved into all the Junior Isas in the UK would be worth £255m more than the amount saved into CTFs.

What Which? is calling for

The government stopped adding contributions to CTFs in 2010. However, children born between 1 September 2002 and 2 January 2011 aren’t allowed to open a Junior Isa, and transfers between the two products are prohibited. 

We are calling on the government to change these rules. To find out more about how Junior Isas work, visit our Reviews of Junior cash Isas.

‘Date of birth shouldn’t stop you getting the best deal’

Richard Lloyd, executive director at Which?, said: ‘It’s simply not fair that the date of your child’s birth could stop you getting the best deal on their savings. The government must push forward reforms to protect the investments of millions of children with money in CTFs.’

‘We would also like the government to merge cash CTFs and shares CTFs into Junior Isas, so that savers who are unaware they are missing out on Junior Isas get access to their benefits.

‘However, switching from stakeholder CTFs should be voluntary, because some Junior Isas don’t cap annual charges. Automatic switching could mean CTF holders end up with a worse deal, in some cases.’

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