Childs Trust Fund Can Be Converted To Junior ISA’s
From April 6th, parents will be able to transfer money from their childrens trust fund, into a junior ISA after years of having savings stuck in an obsolete savings account.
Children born between September 2002 and January 2011 were eligible to a Child Trust Fund. This was soon replaced with the Junior ISA’s which are much better value. However, those who had already committed to the CTF have been missing out on the impressive saving rates of the Junior Isas, whilst the saving rates of the Childrens Trust Funds are constantly dwindling.
In addition, three in four child trust funds are in “stakeholder” accounts that are considered poor value. Most invest in tracker funds and charge an excessive 1.5pc a year. Purchasing the same tracker fund via a Junior Isa can reduce the annual charge by at least 50pc, therefore they are of a much higher value.
So from April, parents will have much more choice. Here are some of the things to consider when comparing CTF’s and Junior ISA products:
Most people have a “stakeholder” Child Trust Fund which is invested in the stock market. Here are some features of a stakeholder Child Trust Fund which you might want to consider before transferring your account.
- Stakeholder child trust funds, like the one from Family Investments, have to accept top ups into the account from as little as £10.
- The charge for running a stakeholder Child Trust Fund is capped and cannot be increased at any time throughout the life of the account.
The most comparable product to a stakeholder Child Trust Fund is a Junior ISA invested in the stock market. But there are some important differences:
- Junior ISA providers set their own limits on minimum premiums into the account, so can set higher minimum payments. They can also set their own limits on accepting transfer balances.
- Though there are plenty of good value Junior ISAs, such as the one provided by Family Investments, Junior ISA providers do not have to cap their charges and are free to change them at any time.
If you are thinking of making the switch, only the parent who opened the account can authorise the switch.
CLICK HERE to find out if your child has hidden saving accounts.