A flagship government scheme to get millions of parents saving for their children's future is failing to get the support of some of Britain's biggest banks and could fall flat.
Junior individual savings accounts (JISAs) are due to be introduced on 1 November, allowing up to £3,600 a year to be put into either cash savings or equities tax free. The scheme, announced last year by Chancellor George Osborne, was designed to replace child trust funds and help parents and grandparents save for their children's university fees or a deposit on a first home.
However, an Independent on Sunday investigation reveals that big-name providers are not yet prepared to support the scheme, instead adopting what one senior banking source called a "wait and see" approach. As a result, parents and children planning to open JISAs are likely to find the choice of providers severely limited.
Some of Britain's biggest high street names are not planning to have accounts available for the 1 November launch. A HSBC spokesperson said that while the bank is "extremely interested" in offering a JISA, it "doesn't have a date for a launch". Barclays' approach was the same. Lloyds, which is Britain's biggest savings provider, said it was still "working through the detail" of JISAs only three weeks prior to the start date, making it unlikely, according to observers, that they will be ready in time.
Of the big high street names, only Nationwide would confirm that it would be ready to go to market with a JISA cash savings account on the launch date. However, it said that there were "no immediate plans" to distribute an equity ISA, which can potentially offer higher long-term returns than cash.
Ben Yearsley, from the independent financial advice firm Hargreaves Lansdown, which has announced details of its own JISA launch, said he was amazed at the attitude of the big banks. "Perhaps they don't think that the £3,600 savings limit is enough to bother with, but I think that is shortsighted. That sum can add up very quickly," he said.
"It should be easy to administer as, basically, it's an adult ISA with a lower investment limit. It's great for people like us who will be offering equity JISAs from 1 November but it does mean savers will have fewer choices than they could rightfully expect, particularly in cash."
Likewise, Tom Stevenson, the investment director at Fidelity Investments, which will be offering a JISA through its fund supermarket, said he thought it was essential to make the 1 November date. "We wanted to be able to offer the advantages of a junior ISA, no matter what age, straight away. It is hard to understand why anyone would not turn to a junior ISA as the first place to save or invest for a child because there are many tax efficiencies and administrative advantages for those making contributions for a child."
Fidelity and Hargreaves Lansdown both offer fund supermarkets which allow savers to spread their money between a massive range of funds. Mr Stevenson said: "Unlike with an adult ISA, a junior ISA has to be with one provider at any given time (although it can be switched between providers if you wish). This means that if you invest with a platform [fund supermarket] you can allocate the allowance among a variety of fund providers each year, rather than being able to invest with only one provider."
It seems only a handful of fund management groups will be ready to offer a JISA come 1 November, perhaps preferring to pick up business through the fund supermarkets. Witan is believed to be ready, but giants such as JP Morgan and F&C are not expected to come to market until the first quarter of 2012. "A lot of people are holding fire but F&C's experience with child trust funds means they gained a huge amount of business from under-18s, and most people investing in CTFs kept with the same provider," said Annabel Brodie Smith, communications director of the Association of Investment Companies.