From January 1st 2011, the current Government completely relinquished all payments made into the Child Trust Fund scheme as a result of sharp austerity cuts and budgeting. Taking its place from November 1st 2011 will be the Junior ISA, a new tax efficient savings account designed for adults to save and invest on behalf of children.
Experts fear as a result of the introduction of the Junior ISA that the £2 billion invested in Child Trust funds could be subject to years of poor returns as there will no longer be incentives for Investment Firms to offer competitive rates. Over the past year the choice of CTF investment funds has halved to 23, while some banks have abandoned CTF savings accounts altogether.
Current draft regulations say: “It will not be possible to transfer CTFs into Junior Isas, or vice versa - children with CTFs will not be eligible for Junior Isas.” However, Philip Warland – head of public policy at the world’s largest Investment Company – Hargreaves Lansdown, has responded to fears by issuing a statement saying “We support your calls. It makes sense for child trust fund savers to be allowed to move their money into a Junior Isa.” He then went on to add “The thing preventing it from happening immediately is that systems cannot be updated in time for the launch of Junior Isas. But in time, there is no reason why it shouldn’t take place.”
The junior ISA will still be available to all children who have missed out on the Child Trust Fund Scheme. Parents, family and friends have the opportunity to deposit up to £3,000 a year into the account and the money is locked away for the child who can withdraw the proceeds when they reach adulthood.
The Government are implementing plans to contribute into Junior ISAs exclusively for cared for Children. Chancellor George Osborne speaking on the subject during a recent Treasury questions at Parliament told the house “I know these children face particular challenges and I can tell the house the Department of Education will work with others to make the necessary funding available to ensure we can provide the support they serve. The sum of money involved will be around £5m.”
There will be two types of Junior ISA; a cash Junior ISA – which will earn interest like a savings account from a bank or building society, and an investment Junior ISA – which will invest in stocks and shares.
Well-established child savings provider, Foresters offers an extensive range of savings plans and financial products for Children. They are expected to offer a new Junior Stocks & Shares ISA. To register your Interest please go to: http://www.forestersfriendlysociety.co.uk/junior-isa/register-my-interest.aspx