Parents of children with Child Trust Funds (CTF) will continue to be blocked from transferring into a Junior ISA, the government has confirmed.
Junior ISAs were introduced in November as the latest attempt to encourage saving for children, following on from the abolition of CTFs at the beginning of 2011.
However, many CTF holders were left in limbo as they were unable to transfer into or set up a Junior ISA, which offers more flexibility and choice of investments, although they can continue to top up existing accounts.
Answering a question from Stephen Mosley MP, financial secretary Mark Hoban explained why the government is sticking to its previous position.
"Allowing CTF accounts to be transferred to a Junior ISAs would require changes to the legislation for, and structure of, the CTF that could impact upon all account holders and investors," he said.
"So before taking action, the government would want to make sure that any changes are in the best interests of all CTF account holders. Given the differences between the schemes - in particular the CTF stakeholder account feature - allowing transfers will not necessarily achieve this objective."
He added the government would continue to monitor the situation to determine whether further action is needed in the future.
Danny Cox, head of advice at Hargreaves Lansdown, said: "CTFs are already a dying product and it is possible to obtain far better Junior ISA products and terms than CTFs.
"Children with CTFs risk worse returns because of this and maintaining the stakeholder protections could disadvantage these children."
He suggested an alternative might be to allow the children affected to invest new money either in a CTF or a Junior ISA.
Claim from SocGen's global markets division
Third annual Hampton-Alexander review
European Commission yields to pressure
Numbers in Adviserland
Retirement sector trends