Child Trust Funds (CTFs) were an initiative set up by the Government in 2002 with the idea that every child would have some savings behind them when they turned 18, and to encourage the savings habit. However, from 2011 this programme was replaced with the Junior ISA (JISA) scheme. It is now simple and easy to transfer a CTF to a JISA.
So, the question is: Should you transfer and what are the benefits or drawbacks involved?
Until April 2015, it wasn’t possible to move your child’s money from a CTF to the newer JISA. However, this was lifted once it was recognised that children in CTFs were trapped with lower interest rates and much less choice. The market for JISAs was much more competitive with banks, building societies and other financial providers offering a much greater choice of products. The result of this is that currently JISAs offer higher interest rates than the old CTFs, as firms continue to compete to offer the best rates.
Moving from a CTF to a newer JISA is simple: All it takes is the completion of a single form from the provider of the new JISA you’d like to move across to. In some cases, they’ll even fill in the form for you. From there, the new provider contacts the provider holding the CTF to arrange the transfer. This is normally completed in 15 to 30 days. Beware though: there are a few JISA providers who don’t accept transfers from CTFs, but these are in the minority.
While there are unlikely to be any charges for transferring from a cash CTF, there may be a penalty to pay if switching from a stocks and shares CTF. To be on the safe side, check with your existing CTF provider first.
One thing you can be sure of is that the transfer of a CTF won’t be counted towards the tax-free limit of £4,368 per tax year (2019/20).
Shop around to gauge the best deals out there for Junior ISAs – there is a large range to choose from. But don’t feel you must transfer from a CTF – always check that you’d be better off under a new JISA.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.