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Child trust funds

Find out how to transfer a child trust fund (CTF) to a Junior Isa, what the rules are and whether or not it's a good idea.

In this article
What are child trust funds? What happened to child trust funds?
Why should I switch from a CTF to a Junior Isa? How do I transfer a child trust fund to Junior Isa?

CTFs were once a popular way to save for your children. But poor rates and expensive investments have frustrated parents. Worse still, they hadn't been able to switch to more flexible Junior Isas. 

That's all changed. Since 6 April 2015, parents have been able to transfer from CTFs to Junior Isas if they want to find a new home for their kids' savings - this guide explains how. 

What are child trust funds?

Child trust funds were introduced in April 2005 to encourage long-term saving and give all children a financial boost by the time they reach 18. The government made a contribution of between £250 and £500 to child trust funds. 

There were three options at the time:

Cash child trust funds These are very similar to a cash Isa, whereby the interest earned on savings is paid tax-free.

Stakeholder child trust funds These are accounts see your children's savings  put into stock market investments. Stakeholder rules mean that charges are capped at 1.5% a year, and they have to be invested in a wide mix of investment types. 

Shares-based child trust funds These types of accounts allowed you to either pick an investment fund to put your children's savings onto the stock market, or pick your own investments. 

What happened to child trust funds?

CTFs were discontinued in January 2011, and replaced by Junior Isas. 

By this time, some interest rates on CTFs had fallen, while the charges for investments were high compared with charges on Junior Isas. 

On 6 April 2015, the government made it possible for people with CTFs to switch to more flexible Junior Isas. 

Find out more: Best Rate Junior Isas – get the best deal on your child’s savings

Why should I switch from a CTF to a Junior Isa?

There are a number of reasons why you should switch:

  • Interest rates are higher in Junior Isas
  • There are more Junior Isas in the market to choose from
  • Many child trust funds don't allow new investments
  • Junior stocks and shares Isas are significantly cheaper - you can expect to pay annual fees of between 0.5% and 1%, compared with 1.5% in share-based child trust funds. 
  • Junior stocks and shares Isas have a much wider choice of investments 

How do I transfer a child trust fund to Junior Isa?

Before switching to a Junior Isa, it's important to check the value of the child trust fund you have, particularly for share-based child trust funds. It's also worth checking if there are any exit fees or guarantees that might be lost if you switch away.

From there, you'll need to choose your new Junior Isa provider:

Once you've found a new home for your kids' savings you'll need to complete a Junior Isa transfer form, with your child's details and information about your child trust fund. If you're opening a stocks and shares Isa, you'll need to specify where you want the money invested. 

Once you've submitted this to your new Junior Isa provider, it will carry out the switch for you. 

The switch should be completed within 30 days, and the child trust fund will be closed. 

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