Yorkshire-based Friendly Society Kingston Unity is calling on parents of children with Child Trust Funds (CTF) to check on the status of their savings.
Between 2005 and 2010 around 3 million Child Trust Fund vouchers were handed out by the Government. In five years, the oldest recipients will be able to access their savings when they reach age 18.
However, the money in these funds may not be performing to its full potential and reinvestment into other schemes now could potentially result in a more substantial yield in five years’ time.
The Child Trust Fund (CTF) was a tax free £250 lump sum for parents to invest, which children are able to access on turning 18.
Savvy teen savers are now able to transfer their entire CTF into a Junior ISA to keep the tax-free status of the investment or re-invest in other products. But spendthrifts beware – if the Child Trust is withdrawn as cash at age 18, the tax benefits will be permanently lost.
Kingston Unity, which has its headquarters in Wakefield, holds 95,000 CTF accounts with £48m invested in them. This is an average of £505 per account. Although CTFs have grown at a reasonable rate there are lots of other options out there.
Chief executive of Kingston Unity, Andrew Townsley, said: “There had been a lot of publicity about CTFs this year and savers shouldn’t be pressurised into feeling they have to transfer their CTF to a Junior ISA unless there is a sound financial reason to do so.
“People are often more familiar with the term ISA and feel comfortable with it but it’s important to research properly and check out all the options available.”