Retail savings and investment industry body TISA has endorsed the government's plans to allow holders of child trust funds (CTF) to transfer their funds to ISAs upon maturity, outside of the normal annual subscription limits.
The body, whose aim is to influence the direction of financial services regulation, said it had backed the government's plans to allow CTF switch-overs to junior ISAs, provided that those children sticking to their CTFs could shift their money into adult ISAs easily on maturity.
The Chancellor announced at the end of last month that the government would permit transfers from CTFs to JISAs, which were previously prohibited.
It had held a consultation into allowing the transfers last summer amid concerns that CTF holders were stuck in funds that offered them a worse deal.
TISA had initially voiced concerns about the risks of a permitted switch-over for the existing CTF market, arguing that there was a danger that higher value CTFs would transfer to JISAs, leaving CTFs to struggle with a high volume of low value investments.
TISA director-general Tony Vine-Lott said: "We fully support the Chancellor's wish to support hard-working families save effectively for their children's future.
"In [our] response to the HMT consultation TISA stated that if the government decided to allow the migration of CTFs into adult ISAs it should also change the regulations to state that on maturity any remaining CTFs would convert to adult ISAs without impacting on the annual contribution levels.
"This [will] further encourage CTF providers to continue to invest in their existing products and to provide competitive rates to retain maturing business."
In his 2013 Autumn Statement chancellor George Osborne increased the annual subscription limits of all, ISAs, JISAs and CTFs.
He announced that the 2014-15 ISA limit would be increased to £11,880 per year - half of which can be saved in a cash ISA - while the JISA and CTF limits will both be increased to £3,840, from £3,720.
According to figures obtained by TISA there are currently more than 6.1 million CTF accounts with £4.8bn invested.
Government figures show total Junior ISA funds now stand at £557m after the first full year for which they have been available.
CTFs were given to children born between 1 September 2002 and 2 January 2011, who were given an initial £250 cheque from the government to be invested in a selection of cash savings accounts or funds.
But after the introduction of JISAs in late 2011, those children who held a CTF were facing increasingly difficult conditions.
The interest on their funds could be as little as half that on Junior ISAs, while switching funds within CTFs could also prove expensive with fees of about 6% on some funds.
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