Child Trust Fund v Junior ISAChild Trust Fund CTF Convert to Junior ISA.

With the rafts of new rules that affect Child Trust Funds (CTF) Junior ISA and the new Junior ISA limits that started in July 2014, we thought it time to set out the basics between the two basic regimes.

Child Trust Funds Explained

Child Trust Funds were launched by the then Labour Government and were available for children born after 1 September 2001 but ended on 2nd January 2011 when they were replaced by Junior ISAs.

Initially, the government of the day pledged £250 per child and issued a voucher to be invested in the child trust fund.  Additionally, an extra £250 was issued, again by voucher, for lower income families, making a total government gift of up to £500.  Additionally,  further £250 vouchers were issued at age 7 (plus another extra £250 for lower income family children).

Parents, grandparents etc. were also allowed to contribute up to £1,200 pa in total.  Children were allowed to take control of the CTF at age 16 and then access the fund from age 18.

CTF’s were replaced by the Junior Isa, with no further contributions from government.  But yearly contribution limits were increased to run alongside Junior ISAs, with £3,600 in tax year 2012/13 and £3,720 2013/14 but increased to £4,000 w.e.f. 1 July 2014 and £4,080 Tax Year 2015-16.

Child Trust Funds grow tax free.

Junior ISA Explained

The Junior ISA started on 1 November 2012.  So there was a 10 month gap between Child Trust Funds stopping in January 2012 and Junior ISAs starting in November 2012.  The difference is that Junior ISAs are available to all children including those born before 2002.

The maximum overall contributions: started at £3,600 then up to £3,720 and £4,000 for tax year 2014-15 and then £4,080 tax year 2015-16.

Originally available as Child Stock ISAs or Child Cash ISAs, they are now all interchangeable when ISA rules merged in July 2014.

Again parents and family members can pay in and the child gains full access to the ISA at age 18. 

If the ISA is left invested, it converts to an Adult ISA at age 18.

Junior ISAs again grow tax free in the same way that Child Trust Funds and Adult ISAs do

Transferring CTF’s to Junior ISA.

As part of the process of simplifying the children’s savings market, with effect from April 2015.

This will open up the Junior ISA market to CTF investments as well as old Junior ISAs as more investment providers offer Junior ISA platforms.

Stage 1 – Pre July 14 Junior Cash ISA and/or Junior Stock ISAs – can be transferred to new Junior ISAs from 1 July 2014

Stage 2 – All Child Trust Funds can be transferred to new Junior ISAs from 6 April 2015.

Child Trust Fund v Junior ISA Compared

Whilst child trust funds were the forerunner, the new Junior ISA with its flexibility to hold a mixture of cash or stocks inside the same ISA.  This has prompted more interest from both savers and providers alike.  That said, seek advice first as there is a huge range of Junior ISAs and charges and care should be taken when transferring or converting your child trust fund or old style Junior ISA to a new Junior ISA.

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