It has been announced that the government is due to allow savings to be transferred from Child Trust Funds to Junior ISA from April 2015. This announcement has been expected for some time and speaking about the move, Chancellor of the Exchequer George Osborne said:
“The Government supports hardworking families who want to save for their children. So I’m delighted that, as a result of these changes, over 6 million children who currently have savings in a Child Trust Fund will be able to benefit from better returns and lower charges on those savings in the future.”
It’s expected that this new legislation will positively affect up to 6.1 million children across the UK who currently have savings estimated to be worth almost £5 billion in Child Trust Funds.
It’s currently unclear how parents will be able to manually transfer savings between a Child Trust Fund (CTF) and a Junior ISA. However once the new legislation comes into effect in April 2015, it’s expected (though not yet confirmed) that CTFs that aren’t moved into Junior ISAs will automatically roll over into an adult ISA once the child reaches age eighteen. Analysts expect that 700,000 CTFs will mature each year from 2020.
Needless to say, CTFs that are transferred into a Junior ISA before this time will also roll over into an adult ISA upon the child’s eighteenth birthday.
Why transfer from Child Trust Funds to Junior ISA?
The popularity of Junior ISAs, which were introduced in 2010 following the closure of the CTF Scheme, has invariably come about thanks to its higher interest rates – in many cases offering rates double that of even the highest CTF – 6% compared to 3%.
This significantly higher rate of interest is thanks to there being a much greater number of providers in the Junior ISA marketplace in comparison to that of CTFs, where a shortage of competition helped to keep rates artificially low. The competitiveness of Junior ISA rates certainly helps to give them the edge over CTFs, though currently both are boasting a tax-free allowance of £3,840 for the upcoming tax year, 2014/15, for which parents, relatives, and friends are free to place savings into.
Potential Transfer Limits
There has been no report on limits to the transfer amount as of yet, though if this changes we will of course let you know. Due to the enormous number of families this legislation is expected to affect, more details are expected to be released as the legislation is fully introduced this year, before going live in April 2015.
Understanding Your Options for Moving Child Trust Funds to Junior ISA
If you currently have savings in a Child Trust Fund and would like to discuss your options to transfer to Junior ISA – or for any other reason, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.