Transferring Child Trust Funds to Junior ISAs
Child Trust Funds (CTFs) are tax-efficient savings accounts that parents could open for their kids between 2002 and 2011. They have since been replaced by junior ISAs, but there are options available to you if you opened a CTF before the scheme was shuttered.
This guide will outline exactly what those options are, including transferring a CTF to a junior ISA.
You’ll find the following topics covered below…
Can I have a Child Trust Fund and a Junior ISA?
No. You cannot have a Child Trust Fund (CTF) and a junior ISA. The government introduced junior ISAs to replace CTFs in 2011 and they work in much the same way. Both have a savings cap of £9,000 a year for 2020/21 and can be accessed by the child whose name they’re in from age 18.
Whether you’re saving into a junior ISA or a CTF, the money you put in will be free from both income and capital gains tax, and both types of account can be either cash or stocks and shares-based.
Since CTFs have been phased out, it is no longer possible to open a new account but you can continue to pay into an existing CTF that you started for your son or daughter.
You can open more than one junior ISA in your child’s name, although it is only possible to hold one junior cash ISA and one junior investment ISA at the same time. You can spread your £9,000 allowance across the two accounts, but opening any form of junior ISA will mean that you’ll have to convert any Child Trust Funds you have opened in the same child’s name.
Can you transfer Child Trust Funds to junior ISAs?
Yes. The government introduced the option to convert a Child Trust Fund into junior ISA in April 2015. Since then, anyone who opened a CTF has been able to either keep paying into the same fund (up to the £4,368 a year), switch the existing account to a new provider, or transfer the savings into a junior ISA.
There are two main types of junior ISA: cash and investment. Cash junior ISAs function like a regular savings account with a clearly defined interest rate, while with the investment-based version, your money is invested in stock market equities or collective investment plans, so the price of your investments could rise or fall, depending on how they perform.
You can transfer a cash-based CTF to a stocks and shares junior ISA or vice versa. The same applies to investment-linked CTFs, as they can be converted to cash-based junior ISAs or another investment account. If you’re considering switching to a junior ISA, be sure to speak to an independent financial advisor first as it will not be possible to switch back to a Child Trust Fund account.
Will I have to pay a transfer fee?
If you’re transferring from a cash-based junior ISA then the answer is no. But there are usually costs associated with switching from an investment-linked account. If you are moving from a stocks and shares CTF to a cash junior ISA there may be dealing costs or stamp duty charges involved in selling the assets so you can make the transfer.
You should also be sure to check what management and activity fees you will have to pay if you’re moving to an investment junior ISA, although fees and charges are typically lower for junior ISAs than investment-linked Child Trust Funds.
How to find a lost Child Trust Fund
If you’ve lost track of your Child Trust Fund account, transferring the funds to a junior ISA may still be possible as the government has a handy online tracing tool that you can use to find out which provider your account was with.
You will need to sign up for a Government Gateway ID on HMRC’s website to use the tool. Once you have your login, simply enter your details along with your child’s personal information and HMRC will respond to you within 15 days to tell you which provider manages your account.
You can then contact the provider directly to regain control of the account and kickstart the transfer, but be sure to speak to a financial advisor before pressing ahead with the switch.
Should I transfer my CTF to a junior ISA?
Most experts would recommend transferring a Child Trust Fund to a junior ISA for a number of reasons. Firstly, interest rates on junior ISAs are typically higher than CTF rates. There is also more product choice on offer with junior ISAs and fees tend to be lower.
Since you cannot transfer back to a CTF once you’ve switched to a junior ISA, speak to a financial advisor before making the jump. You will need to be certain you’re getting the best possible deal in terms of investment returns and fees, and the whole-of-market experts we work with can make sure that’s what you’ll end up with. They will also provide bespoke advice every step of the way.
If you’re switching to (or from) an investment-linked account, it is doubly important to work with an expert, as they can weigh up all of the pros and cons of the transfer for you.
Should you decide you want to stick with a CTF, for whatever reason, you will still have the option to switch the account to another provider who is offering superior rates.
How to find junior ISAs that accept CTF transfers
Most junior ISA providers accept Child Trust Fund transfers, but if you’ve found a provider you’re interested in moving to, it’s always worth checking in case they’re among the minority that don’t.
You can contact them directly to request a transfer and they will provide you with the necessary documents, but keep in mind that going directly to one provider will only give you access to their junior ISA deals. There’s a vast market out there and it pays to compare it thoroughly.
This is where an independent financial advisor is worth their weight in gold. They have whole-of-market access and can help you find the best junior ISA to transfer your CTF funds into, based on your attitude to risk, investment experience, needs and circumstances.
Make an enquiry with us and we’ll introduce you to a financial advisor for free.
How do I transfer a Child Trust Fund to a Junior ISA?
You should start by seeking professional advice from an independent financial advisor as they will be able to explore whether a transfer is in you and your child’s best interest. They can also help you find the right Junior ISA if a transfer is the right course of action, and walk you through the process step by step.
The process itself simply involves opening up a Junior ISA. The ISA provider will need to know details about the Child Trust fund you’re moving the funds from, including its Unique Reference Number, and you will need to complete a Child Trust Fund to Junior ISA transfer form.
Your child cannot hold both types of account at the same time, so the Child Trust Fund will need to be closed when the transfer takes place. Only a registered contact of a Child Trust Fund can request the transfer and it must be the same family member who registers their name against the Junior ISA.
Speaking to an expert before you transfer can be highly beneficial as they will be able to help you with all of the paperwork and offer bespoke advice from start to finish.
Speak to an expert
Whether you’re planning to move your Child Trust Fund into a junior ISA or simply transfer it to another provider, seeking professional advice will pay off. We can introduce you to a CTF expert who will make sure the money you’re investing in your child’s future is in the best possible place.
Call 0808 189 0463 or make an enquiry online and we’ll match you with an independent financial advisor for a free, no-obligation chat.