The Junior ISA, released in November of last year, is proving to be a great product for parents and older children alike, much to the chagrin of those saddled with the now defunct Child Trust Fund which preceded it.
A Junior ISA allows any child (who does not already have a Child Trust Fund) to save money and avoid being taxed on any interest or capital gains. Up to £3600 per year can be deposited into the account, which will convert to a normal ISA when the holder reaches the age of 18.
Child Trust Funds, which were opened automatically for every child born between 2002 and 2011, operate on a similar basis, however, lack of interest in them from the banks means that in many cases the Junior ISA represents a better deal. Those who have a Child Trust Fund are not currently allowed to transfer it to a Junior ISA or open one separately.
Campaigners say that this places an entire generation at risk, potentially leaving them stuck with an inferior product and significantly higher charges. “We now have a two tiered system where children with Child Trust Funds have less choice and, in many cases, an inferior product to those children with a junior ISA.” according to Danny Cox of Hargreaves Lansdown.
“The best way to solve this problem is to allow the parents of the six million children affected to transfer from Child Trust Funds to Junior ISA’s, making their own decision about which is the better deal.” He went on to state.
Evidence suggests a high proportion of savers are holding off on investments to see what the industry and government’s next move will be, rather than paying money into an inferior account. A petition calling for the two products to be merged currently has around £4000 signatures and will remain open until August..