Boost in Junior Isa popularity
Six million children were eligible to open Junior Isas, or Jisas, when they were launched in autumn 2011 as part of Government efforts to strengthen the savings culture.
Figures released by HM Revenue and Customs (HMRC) showed that 295,000 of the tax-free accounts were opened in 2012-13, the first full tax year of the scheme, of which the vast majority were cash savings accounts rather than holding stocks and shares.
In the previous financial year, 71,000 accounts were opened in the five months after launch. The average investment in the last financial year was £1,327, edging down slightly from £1,623 the previous year.
A parent whose child holds a CTF cannot currently transfer the account into a Jisa, which has caused frustration among many families trying to build up their child's nest egg as competition among providers to offer attractive deals tends to be concentrated around the newer Jisas.
The Government launched a consultation in May into opening up Jisas to those whose money is trapped in CTFs, which are held by most children who were born between September 2002 and January 2011.
The consultation document said the Government's preferred option is to leave parents to decide whether they want to transfer funds out of a CTF and into a Jisa rather than simply merging the two types of account from the outset.
Parents wanting to switch from a CTF to a Jisa would not be allowed to keep both accounts running at the same time because of the tax advantages of these products. CTFs and Jisas have similar features in that both lock away cash until the child reaches adulthood and both allow up to £3,720 to be placed tax-free in them in 2013-14.
Danny Cox, head of financial planning at Hargreaves Lansdown, said: "Junior Isas seem to be gaining some momentum which will be improved once transfers are allowed from Child Trust Funds. Allowing transfers would seem far more likely to go ahead than an all-out merger and doing nothing is not a realistic option."
© 2013 Press Association