I have a long list of gripes against various political administrations (past and present) in the UK. But much nearer the top of the list than you might expect is Child Trust Funds (CTFs). These were introduced back in 2002 and were an immediate irritation.
That’s partly because it seemed a bizarre waste of taxpayer money to hand out cash to every single newborn regardless of need; partly because the charges allowed on the investments were too high; and partly because CTFs were to be shut down when each child hit 18 and the money to be handed over to that child to spend on (presumably) a few cocktails in Ibiza.
But back in 2011 it all got worse. George Osborne realised how ridiculous CTFs were. So for children born after 3 January, he replaced them with Junior Individual Savings Accounts (Jisas). These make more sense.
There is no initial hand-out; more providers are in the market offering better prices (as with grown-up Isas); and Jisas can be converted into full Isa status at age 18. But this is when the whole thing got really maddening for the people with the children born between September 2002 and 3 January 2011.
Providers, seeing that the CTF market was dead in the water, stopped bothering with it, or bumped up their prices (most share CTFs come in at a good 1.5% a year). But children with CTFs remained trapped: their parents weren’t allowed to convert the CTFs to Jisas.
So here’s the good news: in April, they will finally be allowed to do so. And they should. They will instantly cut their costs. If they go to a cheap provider and buy their child a tracker, they could get the price down to 0.3%-0.4% a year. They’ll also find a much wider range of investment choices – the average platform offers a choice of 1,000 funds, says Melanie Wright in The Guardian.
All of this might make putting money into your children’s accounts rather more attractive than it does right now. And if you keep doing so, you will be able to build up a good, tax-free pile for your child: the current allowance is £4,000 a year (rising to £4,080 in April). Put that in every year and, with a bit of luck, it will see your child through university.
Jisas, just like adult Isas, can be held either in stockmarket investments (which seems like a good idea for those with a longer-term timeframe), or in cash accounts. If you go for the latter, look
at Coventry Building Society, says Wright – its Jisa cash account pays 3.25%. You don’t see that kind of return on cash much any more.