Child Trust Funds can become Junior ISAs

Some good news on ‘Christmas Eve Eve’ as HM Treasury decides to finally lift the ban on transferring Child Trust Funds (CTFs) to Junior ISAs.

According to a report in the Daily Mail, George Osborne’s decision to lift the ban was because it “supports hard-working families who want to save for their children”.

The coalition government loves ‘hard-working families’, don’t they.

The ability to transfer from a Child Trust Fund to a Junior ISA was excluded from the Autumn Statement earlier this month, much to the disappointment of many commentators.

It follows the launch of Junior ISAs in November 2011.

Child Trust Funds were available for babies born between 1st September 2002 and 2nd January 2011.

Around 6 million children have Child Trust Funds worth a combined £5bn.

There is broadly no difference between the two types of accounts, although Junior ISAs are generally superior due to their lower charging structures, more competitive savings rates and wider fund ranges.

Parents will however need to wait until April 2015 until the ability to transfer from Child Trust Fund to Junior ISA is made available.

Junior ISAs are available to UK resident children under the age of 18 who were not entitled to a Child Trust Fund.

Parents can choose between a cash Junior ISA, with no income tax to pay on cash savings, or a a stocks and shares Junior ISA, where your child won’t pay tax on any capital growth or dividends they receive.

Anyone can pay money into a Junior ISA, but the total amount can’t go over £3,720 in a tax year.

Money saved or invested in a Junior ISA is the property of the child and cannot generally be accessed until their 18th birthday, at which stage the child has unrestricted access.

Because of the reasonably small sums of money involved, it is often difficult to get independent financial advice on Junior ISAs, unless this forms part of a wider Financial Planning exercise.