Thinktank fears Junior Isas may not encourage savings culture

0
Have your say

Many low-to-middle income earners may continue to have inadequate savings following the launch of Junior Isas, the Institute for Public Policy Research (IPPR) found.

The thinktank, which itself proposed a ‘baby bond’ in 2000, said the previous Labour government which introduced the Child Trust Fund (CTF) failed to make the idea popular enough to survive.

Its report, titled Asset Stripping: Child Trust Funds and why the asset welfare agenda failed, found key elements of the CTF are absent from Junior Isas, which are a “pure savings product”.

“Without better savings vehicles too many low-to-middle income earners may continue to have inadequate savings,” the IPPR warned.

CTFs were introduced for children born on or after September 1, 2002.

Parents initially received a £250 voucher from the Government at birth, with those from less well-off families getting £500, while parents, friends and relatives were able to save up to £1,200 a year into the funds.

CTFs were scrapped for children born from this year within weeks of the coalition Government taking office in a bid to save £500m a year, prompting anger in some quar- ters.

The Government has said it is trebling CTF saving limits to reach the same level as Junior Isas, to stop holders being disadvantaged.

Unlike the idea behind the previous savings system, the Government will not be contributing money towards Junior Isa accounts.

Nick Pearce, IPPR director, said: “Child Trust Funds were a bold attempt to ensure all young people, whatever their background, could start adult life with a nest egg.

“But Labour failed to make Child Trust Funds popular or to persuade the public that they should be a permanent fixture in Britain.

“Only time will tell whether the new Junior Isas are going to work.”