However, until yesterday the Treasury had not been able
to give CTF providers the necessary guidance to allow transfers because it had
not yet rubber-stamped the appropriate legislation.
The
Deregulation Bill which contains the finer details, became the Deregulation Act
before transfers from CTFs to Junior Isas will be allowed. Danny Cox, a
chartered financial planner at the independent adviser Hargreaves Lansdown,
said: "It's been a very close call but finally everything is in place for
transfers to take place."
However
even after a Bill receives Royal Assent, it requires 21 days' notice to become
law. Mr Cox said he understood that permission had been obtained for the 21-day
requirement to be waived so that 6 April would be the date that the changes
take effect.
That's
important as it marks the beginning of the new tax year and hitting that date
will reduce complications.
According
to HM Revenue and Customs, there are approximately 6.3 million CTF accounts,
holding an average of £1,400 – or a total of £8.9bn. The tax-free savings
schemes were set up by the Government at the start of the last decade to help
give children a start in life.
Children
were handed £250 at birth in the hope that their parents and grandparents would
then contribute to the funds to provide a nest egg when holders reached 18. The
plan was that children would receive a further £250 when they reached the age
of seven. But the Coalition scrapped CTFs following the election in 2010, which
has meant many have remained dormant.
But it
seems that parents wanting to shop around for the best rates for a child's CTF
cash are being turned away because of uncertainty among the providers of Junior
Isas. The Independent called child trust fund providers to ask whether they
could transfer CTF cash, only to be told by helpline assistants that advice
could not been given until the final regulations were released.
Other
financial advisers are also worried that changes were being implemented too
close to the bone.
Alistair
Cunningham, a financial planning director at Wingate Financial Planning in
Caterham, Surrey, said he had been watching the Bill's progress and was
concerned it took so long to get Royal Assent.
He added:
"As CTFs were available for a relatively short period, it will often make
sense to replace them with Junior Isas. But it is crazy that we are less than a
working week from supposedly being able to transfer CTFs but have only just got
Royal Assent on the final law."
Mr Cox
said concerned parents could still do their research in anticipation of the
changes. He recommended checking the cost of any transfer with your child's CTF
provider.
"Stakeholder
and cash CTFs will not have any charges to transfer to Junior Isa as
stakeholders are not allowed to by law, However, some cash CTFs may involve a
loss of interest if on a fixed-rate deal. It is unlikely but worth checking,
and non-stakeholder CTFs may apply a transfer charge."
Parents
need to note that only the registered contact of a CTF can instruct the
transfer. Mr Cox said: "An instruction from anyone other than the CTF
provider will be rejected. If you are unsure, check with the CTF provider. At
the same time, check your CTF provider has your up-to-date address and contact
details.
Mr Cox
said he was optimistic that the changes would be made in time, adding:
"There is light at the end of the tunnel for CTF holders. We expect the
final legislative hurdles to be skittled over by 6 April so that transfers will
go ahead as scheduled.
"Providers
are geared up for a rush of transfer applications after the Easter weekend. The
key to a speedy transfer is for parents to remind themselves who the registered
contact of the CTF is."
Who knew? Majority of parents unaware of changes
Isa
provider Scottish Friendly said that one in four Child Trust Fund accounts had
not received any contributions since being opened.
It
claimed 1.5 million of the 6.3 million active Child Trust Funds had not
received any contributions and an estimated 1.4 million CTF accounts could have
less than £250 in them at present – which means that they have actually lost
money.
The
provider said its research revealed over half (58 per cent) of parents were
unaware of changing legislation that will allow them to move their money into a
Jisa.
Calum
Bennie, savings expert at Scottish Friendly, sounded alarm bells as she
commented: "There was a nationwide campaign to bring about these changes
and allow more freedom in how parents save for their child's future. However,
no sooner was the campaign successful than it seemed to drop off the radar.
"So
much so, that now there is a very real danger that if more isn't done to let
people know about the change in rules, parents may just end up leaving their
money in a CTF where interest rates can be as little as 1.05 per cent."
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