Our son was born on Christmas Day 2010. This brings various logistical issues but a financial dilemma too. It’s one that I’m hoping will be rectified by Chancellor George Osborne in his Budget tomorrow.
Our baby was eligible for a child trust fund (CTF) and a £50 contribution from the government when he was born on Christmas Day 2010. We were delighted.
Ok, so the amount had been reduced from £250 from when the accounts were originally set up, but it was still £50 of free money for his future.
Junior Isas paying more than trust funds
However, our research shows that since CTFs were replaced by Junior Isas, the average cash Junior Isa is already paying more than a fifth more interest than the average trust fund.
So, the natural solution would be to open up a Junior ISA instead.
Here’s the problem – unfortunately that’s not an option as you can’t open a junior Isa if you already have a CTF, nor can you transfer your CTF to a Junior Isa.
This means that our son’s money, along with six million other CTF account holders, will be stuck in a trust fund until he reaches 18.
Nationwide trust fund versus Isa
To give you an idea of what he might be missing out on, Nationwide is paying 3.00% (including 0.9% bonus) on its Junior Isa. This compares to 2.1% (including 1% bonus) on its cash child trust fund.
Our research reveals that child savers could miss out on more than £300 million in interest over the next ten years. Are you affected by the situation or have you just missed the trap?
I can deal with working out how to squeeze our son’s birthday celebrations in between stockings, turkey and travelling between two sets of grandparents. But while working out what to do on Christmas Day remains a complicated challenge, my message to the Chancellor is simple – change the rules and make sure a generation of children don’t continue to miss out.
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