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Child Trust Funds to Junior Isas transfer welcomed

Change could benefit up to 6.1m children

Boy inserting coins into a piggy bank

Up to 6.1m children will be able to transfer their savings from a Child Trust Fund (CTF) to a Junior Isa from April 2015, under new changes announced today by the government.

CTF policyholders who decide to move their savings to a Junior Isa will benefit from higher interest rates and lower charges, as well as a wider choice of products and providers.

Which? has welcomed the change, adding that it is important that all parents of children with CTFs are clearly notified about the ability to transfer.

Our guide to Child Trust Funds has more information on their rates and how they work.

Junior Isas: higher interest rates and lower charges

Currently, any child born between 1 September 2002 and 2 January 2011 isn’t allowed to open a Junior Isa, and transfers between CTFs and Junior Isas are prohibited.

In August, Which? called on the government to allow CTF policyholders to transfer to Junior Isas. This followed the launch of a government consultation to determine whether or not to allow families to transfer savings held in CTFs to Junior Isas.

Which? calculated that over the next 10 years, CTF policyholders unable to transfer to Junior Isas could lose out on more than £300m due to lower interest rates and higher charges.

Currently, the highest interest rate for a CTF is 3%, compared to 6% for the highest interest rate available for a Junior Isa. 

For cash accounts, Junior Isas paid on average 0.5% more than CTFs. Over the next 10 years, this could mean a £52m shortfall for cash CTFs. 

For stakeholder accounts, CTF charges are typically 1.5% a year whereas in Junior ISAs they could be substantially lower.

Facts about Child Trust Funds and Junior Isas

At present, there are 6.1m CTFs, holding almost £5 billion in deposits. This compares to 300,000 Junior Isas, totalling more than £550m in deposits.

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, up to the age of 18, when it converts into an adult account.

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