New legislation to allow Child Trust Funds to be transferred to Junior ISAs

on Mar 30, 2015
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From 06 April, Child Trust Funds (CTF) will be able to be transferred to Junior Individual Savings Accounts (JISA). The Deregulation Bill received Royal Ascent last Thursday allowing this new legislation to take effect.

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CTFs were introduced by the last Labour Government in 2005, with children born after 1 September 2002 being eligible for an account. The main goal behind the account was to ensure every child had savings by the time they reached the age of 18 and the scheme was strongly recommended at the time as a way of getting children into the habit of saving money, while also helping them to understand personal finance. An initial subscription was granted to eligible children in the form of a voucher, worth either £250, or £500 for children living in low income families. When the child reached 7 years of age, a further payment from the Government would also be deposited into the account. However, the scheme was ultimately scrapped on May 24, 2010.
Instead, JISAs were introduced by the Coalition Government on 01 November, 2011 as the successor to CTFs. These tax-free savings accounts work in much the same way as an adult ISA, except funds within the account are unable to be withdrawn until the child reaches the age of 18. Children of 16 can open an account for themselves, or alternatively a person with parental responsibility can open an account for a child.
Transferring money from a CTF into a JISA was not permitted upon the JISA being introduced. However, with the legislation set to change in April, the restriction will be lifted. To those who have criticised CTFs as often coming with confusing and excessive charges, the ability to transfer funds to a JISA will come as a welcome adjustment.
While both products provide parents with the ability to save up to £4,000 per year for their child, tax free, a JISA provides higher interest rates on cash and lower management fees for investments, making it a far more attractive option.
JISAs are available from banks, building societies, fund managers, friendly societies, financial advisors and investment shops. There are two types of JISA available, a cash Junior ISA or a stocks and shares Junior ISA. A child can have either one or both types of JISA.

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