Child Trust Funds can be moved to Junior ISAs from 2015
Following consultation with various stakeholders, the Treasury has announced that savings kept in a Child Trust Fund (CTF) will be transferable to a Junior ISA from April 2015 – much to the relief of many who had hoped for such an announcement in the 2013 Autumn Statement and were disappointed when this failed to materialise.
A better deal for young savers with Junior ISAs
Up to 6.1million children stand to benefit from this change, which will see them able to take advantage of the benefits offers by Junior ISAs such as better returns on their investment, lower charges, and a wider choice of products.
Junior ISAs were introduced in 2010, following the closure of the Child Trust Fund Scheme. Up to £3,840 per year can be put into a Junior ISA without tax being paid on any interest or gains. When a child turns 18, the Junior ISA account automatically becomes an adult account.
Good news on the horizon for Child Trust Fund holders
Discussing the proposed transfers, Chancellor of the Exchequer George Osborne commented that: “As a result of these changes, over 6 million children who currently have savings in a Child Trust Fund will be able to benefit from better returns and lower charges on those savings in the future.”
Danny Cox, head of financial planning at Hargreaves Lansdown, said: “The days of the CTF have been numbered since the launch of the Junior ISA. CTFs have been in terminal decline since 2011, seeing millions trapped in expensive products or suffering lower interest rates than their Junior ISA counterparts. This change will pave the way for a significant improvement in choice for children with CTFs.” He also advised that: “If you are paying into a CTF regularly you should continue to do so. If you are unhappy with your current CTF provider you can transfer the value to another CTF and it is worth shopping around to check you are still benefiting from a competitive interest rate or not paying excessive charges.”
The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.
No news, feature or comment should be seen as a personal recommendation to invest. If you are at all unsure of the suitability of this type of investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.