Since 6th April 2015 those with a Child Trust Fund (CTF) have been able to transfer to a Junior ISA should they wish to do so.
Updated July 2016.
The Children’s Mutual is part of Foresters Financial, which looks after the savings needs of over a million children in the United Kingdom. Whether you have a Child Trust Fund or a Junior ISA with us, we remain fully committed to helping you give your child a head start in life.Find out more and transfer your CTF to our Junior ISA
There has been a lot of information available when comparing CTFs and Junior ISAs. Below are a few things to keep in mind when considering what to do with your child’s savings. If you do decide to transfer your CTF to a Junior ISA, our Junior ISA is professionally managed by Schroders and can be set up and managed online.
What is the difference between Child Trust Funds and Junior ISAs?
Both Child Trust Funds and Junior ISAs are very similar schemes that allow parents to save up to £4,080 a year tax efficiently on behalf of their child. There are a few differences when comparing a Child Trust Fund and a Junior ISA, some of which are listed below:
|Child Trust Fund (CTF)||Junior ISA|
|Eligibility||Children born in the UK between September 2002 and 2 January 2011 were given a Government issued voucher to invest with an approved CTF provider.||All children born in the UK under age 18. You can transfer a CTF to a Junior ISA, you cannot have both.|
|Limits||£4,080 birthday to birthday||£4,080 each tax year|
|Types||Both Stocks & Shares and Cash available, but only one CTF can be held by the child.||A child can have both a Stocks & Shares and a Cash Junior ISA, as long as the combined contributions don’t exceed the yearly limit.|
|Scheme requirements||Many CTF Providers offered a “stakeholder” account, which met Government standards on investment, with lower minimum contributions and capped charges||Some Junior ISA providers offer “stakeholder” accounts (such as us). However, this is not a requirement and some may require larger minimum contributions.|
Do I need to transfer my CTF?
No, you do not have to, but you are free to transfer to a Junior ISA if you wish to do so. If you do decide to transfer to a Junior ISA, you will not be able to transfer the account back to a CTF. Our existing CTF accounts will remain active and open to additional investment and the contribution limit each year, running from birthday to birthday is £4,080.
Considering moving to a Stocks and Shares Junior ISA?
Here are some things you should consider if you decide to transfer to a Stocks and Shares Junior ISA:
- What are the charges?
Many companies have a range of charges which may impact the return on your child’s savings. Depending on which company is looking after your child’s account and which funds have been invested in, the account could have an annual management charge of as much as 2.5%, or dealing charges for every investment you make or even a charge for not having a paperless service. Our Junior ISA has no charges for the first year and only 1% annual management charge thereafter.
- What is your risk appetite?
Investing in stocks and shares may be a higher risk than saving in cash, and the level of risk will be dependent on which types of funds you choose to invest in. With our Junior ISA your child’s savings are invested in a risk-controlled fund, where the fund is made up of a mix of investments including shares, gilts and bonds. No more than 60% of your investment will be in shares, therefore protecting your child’s investment against the sharp falls of the stock market, and ensuring that they will benefit if the market rises.
- Would you like someone else to make the investment choices for you?
Some Stocks and Shares Junior ISA providers may offer platforms which allow you to make your own investment choices for your child’s savings, with some companies offering over 4,000 funds. Although this allows you choice, it may be daunting making the investment choices for your child’s savings, as well as time consuming. If you would prefer not to make the investment decisions then you may decide to choose a Junior ISA which is invested in a tracker fund, or one which is professionally managed, like our Junior ISA.
Considering moving to a Cash Junior ISA?
You may have seen attractive interest rates offered with Cash Junior ISAs. While cash savings may offer reduced exposure to capital risk, there are a few things you should think about when considering cash accounts:
- Cash Junior ISAs offer a guaranteed return, but inflation may reduce its buying power when the child reaches 18.
- “Headline” interest rates that may revert to a lower rate after an introductory period.
- Providers may impose special conditions to headline rates, such as:
- Requirement to have other savings with the provider
- Only applying headline rates to new contributions (and not to previous contributions)
- Requiring a commitment period of regular contributions.
Whilst investing in stocks and shares (i.e. equities) may be a higher risk, it offers the potential for better returns, especially over a longer period of time, such as the life of a Child Trust Fund, as well as more investment choice. Whilst past performance is not a guarantee of future performance, Barclays Gilt Equity Study 2016 shows that an investment over 18 years into equities is likely to outperform a cash investment 99% of the time based on annualised real returns analysed since 1899. Over an investment period of 10 years the figure is 90% and over 5 years, our minimum recommended term, it is 74% more likely to outperform cash investments.
The graph below illustrates the difference in growth between cash and stocks and shares market over the past 5 years.
The growth rate is based on Aberdeen Foundation Growth Fund taking account of Annual Management Charges. Cash rate is based on typical clean 2.1% Junior ISA rate. Bank of England base rate of 0.5%. This illustration shows the difference in potential growth between stocks and shares and Cash Deposit Investment. It does not compare Cash Junior ISAs with Stocks and Shares Junior ISAs.
Past performance is not a reliable indicator of future performance.
Any stocks and shares investment carries the risk that capital could be lost.
Tax treatment depends on individual circumstances and may be subject to change in the future.
Can my child have a Cash and a Stocks and Shares Junior ISA at the same time?
Your child can have both a Cash and a Stocks and Shares Junior ISA as long as the combined amount does not exceed the current allowable limit of £4,080 this tax year.
We’re committed to Child Trust Funds
The Children’s Mutual and Foresters Financial have been helping families save for over 140 years, and will continue to remain firmly committed to helping them achieve their goals.
So whether you are looking to help fund higher education, a deposit on a first home or another milestone event – our child savings accounts are an ideal place to help you build a lump sum for your child, whether you have a CTF or a Junior ISA.
Imagine the difference that you can make to their choices and opportunities when they reach 18.Find out more and transfer your CTF to Junior ISA >
Top-up a CTF or Junior ISA >