More than half of CTF savers have cut back or stopped investing

More than half (55%) of Child Trust Fund savers have stopped or cut back on investing new cash into the accounts which have pulled in more than £4.3 billion, new findings from Consumer Intelligence shows.

Its research among parents and grandparents who have invested in CTFs comes as the Government announces a 12-week consultation on allowing investors to transfer out of CTFs into potentially more attractive Junior ISAs.

Currently around 6.3 million children have savings in CTFs which were closed to new business in 2011 and could now potentially transfer to JISAs which allow parents, grandparents and families to invest up to £3,600 a year tax-free.

The study shows 38% of investors have stopped putting money into the accounts while 17% have cut back. Around one in eight (12%) of parents and grandparents say they have cut back because the accounts they have are no longer competitive.

David Black of Consumer Intelligence commented: “Over £4.3 billion is trapped in CTFs many of which are effectively zombie accounts and the millions of children with money invested are clearly at a disadvantage to those who can open JISAs.

“The Government consultation will hopefully result in a victory for common sense. CTFs look to be a classic example where it pays to review your existing deal. Parents would be well advised to check their current deal when transfers are permitted.”

According to Consumer Intelligence, just one cash Child Trust Funds pays 3% Gross AER or more. The top paying cash Junior ISA at Halifax is 6% Gross AER for those aged 16+ while 12 accounts pay 3% or more.