Media Release

Poorly targeted Junior ISA shows ‘wrong lessons’ learned from the Child Trust Fund, says think tank

The new children’s savings scheme, the Junior ISA, is poorly targeted and will benefit the very families who need it least, a leading think tank said today. The criticism was made by the Social Market Foundation, who carried out an analysis into the use and take-up of the scheme’s precursor, the Child Trust Fund (CTF), earlier in the year.

Ian Mulheirn, Director of the Social Market Foundation said: “That the Junior ISA is being hailed as a successor to the Child Trust Fund shows that the wrong lessons have been learned from the experience of the CTF. Our analysis found that families on higher incomes made significantly more contributions to their Child Trust Fund than those on lower incomes, despite the head start given to those families by the Government.

“This problem is exacerbated with the Junior ISA. Cash savings in children’s names are already effectively tax free. So this ISA will only benefit children whose parents are savvy enough to play the stock market and get the advantages offered by the scheme. The new scheme will therefore give tax breaks to well-off families who need no encouragement to save for their children. This isn’t a good use for taxpayers’ money at a time of deep spending cuts.”  

As part of its Savings on a Shoestring report into wider savings behaviour, the Social Market Foundation examined Child Trust Fund administrative data. Key findings on the Child Trust Fund include:

  • Around one quarter of CTF accounts were opened automatically for parents by HMRC;
  • Accounts opened in 2009 with the £500 voucher (the amount available to lower income families) had an average value of £675. Those given a £250 voucher (the amount given to higher income families) had a value of £673;
  • For 22% of Child Trust Fund accounts, family and friends made additional contributions which averaged £300 a year;
  • Family and friends had made additional contributions to 22% of CTFs, averaging £289 a year. Contributions were more frequent in higher income households (27%) and higher on average (£313 per year) than in lower income households (12%, averaging £181 per year).

Notes to Editors

  • The Junior ISA will be launched on 1 November 2011
  • The Social Market Foundation’s report Savings on a Shoestring was published on 18 July 2011
  • The Social Market Foundation (SMF) is a leading UK think tank, developing innovative ideas across a broad range of economic and social policy. It champions policy ideas which marry markets with social justice and takes a pro-market rather than free-market approach.



Related items:

Page 1 of 1