The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly.
I do love Yes Prime Minister. It’s one of the reasons I read Politics at Hull, indeed I remember as a student listening on my walkman (remember those) to taped radio episodes of Yes Minister. We were a geeky lot in the Politics department!
Sir Humphrey was by far my favorite character mostly because he had such a knack for coming up with such wonderful cynical compromises that would have made Harold Wilson proud (and whom David Cameron could use a few lessons given his recent troubles over Europe).
But I think that we could do with Sir Humphrey to sort out the mess we’re getting into with child savings.
The government has this month launched it’s consultation on allowing CTFs to transfer to JISAs.
As you may know we at Scottish Friendly have got quite strong views on this point.
However I do recognise that there are problems for the market with a full scale switch to Junior ISAs. Leaving aside some important technical difficulties (such as MIFID exemptions for CTFs which would no longer apply were they switched en masse to a JISA) there are clear problems. For example, the government is at pains to point out the concerns it has over the CTF stakeholder conditions. If they are switched to JISAs, could they be imposed on the new contracts?
Of much more practical significance though is what we do about those CTF providers who are unable or unwilling to become ISA managers. What happens to those books of business? They can’t just be left in limbo and I’m not sure it’s possible (or legal) to force an institution to apply for new permissions. This may seem trivial but it’s important to remember that there are for example a large number of small credit unions with tiny CTF books who are highly unlikely to have JISA permissions and won’t want to put their members through the cost of setting up a new scheme for such a small number of accounts.
As ever with government policy it’s the details and the long tail of small problems that make the grand design impossible.
If that is the case then we’re left with a very poor second choice of allowing clients in CTFs to switch to JISAs on a case by case basis and we end up with the chaos of two separate child savings regimes and the mess of some families with one child having a CTF and the other having a JISA.
But here’s an idea straight out of Sir Humphrey’s book. Why not allow individual transfers between CTFs and JISAs but at the same time rename CTFs JISAs? If we have to we could formally call them JISAs (CTF) – that’s exactly how we at Scottish Friendly used to treat PEPs when they effectively became ISAs.
CTFs currently have the same limits as JISAs, to a client they look and feel like a JISA, so why not call them it. It wouldn’t be the same regime to those in the know in the industry (we would for instance have two separate permissions and reporting regimes) but we can cope with that. The vast majority of clients on the other hand would simply see this as the same regime, and both kids would now have a JISA no matter how old they were.
The only issue being that you couldn’t transfer from a JISA to a CTF – sorry should I say JISA (CTF), and for the 3 clients who want to do that over the next 10 years we can probably explain the situation to them!
The point is that this would at least look and feel to the vast majority of the pubic out there like a single child savings regime. Whilst the purist in me knows that this would not be the case, from a practical point of view does it really matter? Sir Humphrey is whispering in my ear that of course it doesn’t and I’m tending to believe him.
For example, does it matter that in 1966 the ball did not cross the goal line? No. What matters is that the vast majority of people (other than Germans, Welsh and Scots) think that it did and the officials played along!
Let’s recognise the reality of the situation, we need what looks and feels like a single child savings regime and we need transferability. There are all sorts of problems with the first of the government’s solutions and the second isn’t really a solution at all. There is however a third policy solution, it’s cynical, manipulative and verging on dishonest but it would work and it’s missing from the government consultation.
No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.