Following the government’s announcement at the end of last year to allow child trust fund transfers to junior ISA’s, changes to existing CTF’s were also brought about.
Child Trust Funds were broadly moulded to model a Junior ISA from April 2015 when the transfer ban is lifted. Previously the CTF’s annual contribution allowance was increased back in 2011 meaning that contributions from the child’s family and friends up to an overall total of £1200 each year was increased to £3600. This now stands at £3720 and is due to be increased again in April 2014.
The main difference between CTF’s and JISA’s related to what happens at maturity. With a Child Trust Fund, when the child turns 18 a cheque in the name of the child will be sent out regardless of whether the funds are to be spent or reinvested. With a Junior ISA the funds are eligible to be converted into an adult ISA meaning that their tax free growth status is retained for as long as the funds remain invested. This was a major point as tax status and future allowances were lost if a CTF holder wanted to reinvest into an adult ISA.
Alas, this rule has been changed. CTF maturity is now treated in the same way as a Junior ISA.
Why then would anyone transfer from a CTF to a Junior ISA? This is an interesting question. There are many reasons why people may still want to transfer including interest rates, fund choices, charges, clearer product literature, simplifying the administration of multiple accounts etc. I suppose it all simply comes down to personal choice.
For more information on The Children’s ISA range please visit www.thechildrensisa.com