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Junior Isas pay better rates than child trust funds

Millions could be stuck in poor savings accounts

Child saving

Research by Which? shows that some Junior Isa rates are beating those by paid child trust funds. 

The two biggest building societies offering Junior Isas, Nationwide BS and Skipton BS, are paying higher rates on their new Junior Isa accounts than on their child trust fund accounts (CTFs).

Nationwide BS, the largest building society in the UK, is offering 3% (2.1% excluding bonus) on its Smart Junior Isa and 2.1% (1.1% excluding bonus) on its child trust fund. 

Skipton BS is also paying 3% on its Junior Cash Isa but just 2.65% on its CTF.  

The market average for child trust funds on a balance of £1,000 is 2.41% (excluding bonuses paid if a specified amount is credited to the account), while the market average for Junior Isas is 2.63%. 

Child trust funds cannot switch to Junior Isas

Under current rules, children with an existing child trust fund account are not permitted to open a Junior Isa and they also cannot switch their CTF to a Junior Isa.  

Dominic Lindley, personal finance policy adviser at Which? said: ‘Which? is calling on the Government to change the rules so that those with child trust funds can switch to Junior Isas.  

‘The danger is that the interest rates on CTFs will not keep up with those on Junior Isas and millions of children will be left unable to take advantage of the better paying Junior Isa accounts. We’re already starting to see this happening with Nationwide BS and Skipton BS offering better rates on their Junior Isas than on their CTFs.’

Better interest rate information needed on CTFs

Any rule change also needs to be accompanied by better interest rate information on CTFs.  Recent changes to regulations mean that CTF providers only have to provide statements on the child’s 4th, 10th and 15th birthdays unless contributions have been made to the account in the year.  

Which? is calling on CTF providers to give a clearer indication of the interest rate. This is essential to assist those wishing to shop around and to avoid savings languishing in poor accounts. 

More on this…

  • Junior Isa review- compare accounts to find the best one for you
  • Child Trust Fund review- see how your CTF compares and switch to get a better rate
  • Child Trust Funds explained – a quick guide to CTFs
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