Bringing you live news and features since 2006 

Drop in investments for children after switch from Child Trust Funds to Junior Isas

RELATED TOPICS​

Analysis by Quilter indicates that the proportion of parents investing in the stock market when setting money aside on behalf of children has dropped dramatically since the switch from Child Trust Funds (CTF) to Junior ISAs (JISA).Quilter’s analysis shows that CTFs were more than twice as likely to be invested in the stock market.

Since their introduction, less than a third of payments into JISA accounts have been into stocks and shares, with most accounts held in cash.

In contrast, around 83 per cent of CTFs are held in stocks and shares, offering potential for stronger long-term growth prospects than cash savings.

Before CTFs were discontinued for newborn children, a total of 50 per cent of all accounts were opened by parents in ‘Stakeholder’ investments.

A further 28 per cent were allocated to investment accounts by HMRC, with 4 per cent of parents choosing to invest through non-stakeholder investment products.

Just 17 per cent of parents chose to open a cash account.

Quilter is today warning that the drop in investment rates risks young people not obtaining the best possible return on money set aside for them.

Rachael Griffin, financial planning expert at Quilter, says:

“This significant fall in investment rates in young people’s savings can be explained by a variety of factors.

“Providers of CTFs were required to offer a stocks and shares option alongside a cash offering. In addition, parents were nudged toward long-term investing by literature and tips supplied by government.

“Finally, where CTF vouchers were not allocated by parents, they were automatically put into investment accounts by HMRC. These were known as Revenue Allocated Accounts (RAAA) but even when their impact is excluded, we can still see that over half (54 per cent) of parents actively chose an investment account.

“Parents opening a CTF were guided toward stocks and shares by government advice that markets could normally be expected to outperform cash over the long-term. Research shows savings and investment plans for children tend to be opened in the early years of their life and the nature of CTFs and JISAs also means that we can be sure the money is locked-up until at least age 18, so they will normally be a long-term investment. 

“The nudge toward long-term investing was powerful with CTFs, but that seems to have waned with JISAs. Government, schools and families should look at promoting long-term investment benefits to young people, especially in such a low interest rate environment where returns on cash are weak.”

Latest News

Raymond James Investment Management plans to launch an ETF product platform in 2025 to support strong client demand in alignment..
Aniket Ullal, Director of ETF Data and Research at CFRA Research, has written a note looking at ETFs with exposure..
Tradeweb reports the following data derived from trading activity on the Tradeweb Markets institutional European- and US-listed ETF platforms...
iShares writes that its assets under management have reached USD4 trillion. The firm says this comes off the back of..

Related Articles

Chris Lo, Columbia Threadneedle
In a recent insight on India by Columbia Threadneedle Investments, the firm reports that the country’s economic reforms, which aim...
With an election on the horizon in the United States a group of ETFs is poised to capture investments on...
Robot worker
Qraft Technologies, based in South Korea, specialises in the use of AI in security selection and portfolio construction....
Andrea Busi, Directa SIM
Romain Thomas talks to Andrea Busi (pictured), CEO of Directa SIM, who explains why the online trading platform has just...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by