Low take-up for junior Isa accounts

Some 72,000 new junior Isa accounts were opened in the first five months of their launch, despite predictions that more than a million children will have accounts opened for them.

Junior Isas were hailed as having the "potential to be the most successful children's savings scheme of all time" when they were launched in November last year.

Predictions had put take-up of the accounts, which have a tax-free savings limit of £3,600 a year, at about 20% of the six million children eligible.

Calls have been made to allow parents whose children hold child trust funds (CTFs), which were introduced by the previous government, to move their savings to junior Isas. At present, children who hold a CTF are not allowed to take out a junior Isa, both of which are intended to encourage saving by locking in cash until the child reaches adulthood.

High living costs, a sluggish housing market and low returns on savings in real terms have added to the pressures on family budgets.

The figures come from analysis of HM Revenue and Customs (HMRC) statistics by Hargreaves Lansdown stockbrokers.

It said that £100 per month saved in a junior Isa for 18 years could grow to £38,000, based on a 6% annual investment return.

Danny Cox, head of advice at Hargreaves Lansdown said: "Junior Isas have had a slow start but this is not surprising given the current economic climate.

"New products always take time to bed in and not all providers were ready at launch. It's not helped by the fact that children with child trust funds are not eligible for junior Isa, disadvantaging around six million children.

"At the very least transfers should be allowed between the two. Running two separate schemes adds complexity and doesn't encourage a savings culture."