Should you transfer your child’s CTF to a Junior ISA?

transfer your child’s CTF

Anyone with a Child Trust Fund (CTF) will, from 6th April, be able to transfer it to a Junior ISA, if they so wish.

This change in regulations was introduced by Chancellor George Osborne in December 2013, and could benefit up to 6.1 million children in the UK. Before this announcement, children holding a CTF were previously not eligible to open a Junior ISA.

What is the difference between a CTF and a Junior ISA?

CTFs are savings accounts, which were introduced by Tony Blair’s Labour administration in 2002. Every eligible child in Britain, who was born between 1 September 2002 and 2 January 2011, received a voucher worth £250, with the aim of encouraging saving. In addition to this the parents of those children were also given another voucher, again worth £250 for their CTF, when they turned seven years old.  Some lower income families received more.

The £250 seed money and the additional CTF top-up were ceased in January 2011. The child trust fund came to be replaced by the Junior ISA.

Those who had opened a CTF could still continue to save into a one; however they were no longer available to new customers. Those looking to save efficiently for their children would have to save with a Junior ISA.

Both accounts have the same tax perks, parents can save the same amount into each- £4,080 in the 2015/2016 tax year and £4,128 in the 2017/2018 tax year. Around six million children have CTF’s, and only 400,000 have a Junior ISA.

Do you have to transfer your child’s CTF?

There is no requirement to change your child’s CTF to a Junior ISA, but it may work out better for your child’s savings in the long term. Experts have claimed that the Junior ISA offers more choice and better value, whether it’s higher interest rates on cash accounts, or lower fund management charges.

What are the advantages of transferring your child’s CTF?

The main reasons people have been advised to transfer their child’s savings are:

  • CTFs do not tend to be administered online
  • CTFs are predominantly cash accounts with historically low interest rates
  • CTFs offer a limited investment choice

Once CTFs were discontinued, financial companies put more effort into attracting parents to Junior ISAs, leaving those with CTFs with less investment choice and much steeper charges.

The named parents or guardians on a Junior ISA are not the only ones who can contribute to the fund for the child. Grandparents, friends and family can deposit money whenever they want as well.

Sarah Cole, a financial journalist, told us what she thought of the Child Trust Fund when she was assigned one for her child:

“When the CTF arrived it seemed like a brilliant development. When they were replaced with the Junior ISA, the provider I was with introduced large annual changes, so I switched.  My new provider then promptly did exactly the same. It meant that last year, despite it being an incredible year for the stock market, the growth of the CTF only just covered the annual fee, so I was left with a gain of less than £10, even with the money I had invested.

“For something that was supposed to teach parents the incredible potential of investing for children, it has managed to achieve exactly the opposite.”

Are there any disadvantages of a Junior ISA?

It is worth remembering that the funds in both CTF’s and Junior ISAs will be in your child’s name, locked away until they are 18 years old. At that point, the money will be legally theirs, and parents or guardians may have little or no say in what their child can spend their money on.

Why should you transfer your child’s CTF to a Shepherds Friendly Junior ISA?

There are many great reasons that you should pick a Shepherds Friendly Junior ISA for your child:

  • The Shepherds Friendly Junior ISA plan starts from as little as £10 a month, and you are free to pay in lump sums if you so wish as well.
  • You can vary your premium and add money to the account whenever it suits you throughout the course of the plan, as long as you don’t exceed the annual Junior ISA limit.
  • Our Junior ISA is invested in stocks and shares, giving great potential for long-term growth.
  • We have paid out a bonus each year on all our Junior ISA plans, since its launch in 2011

For more information on Junior ISAs, or if you would like to open one with Shepherds Friendly, please click here. 

If you would like any further information, feel free to call our friendly customer services team on 0330 134 5898

Please note: All information within Your Resource Centre is correct at the time of publication, and we make every effort to keep content accurate. However sometimes information may be out of date. You should not rely on this information when making financial decisions as no financial advice has been given. The information reflects the view of the author and not that of Shepherds Friendly Society.

If you’re not sure what to do when making financial decisions then you should consult a financial adviser, who will likely charge for any advice that is given.

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