How to switch from a Child Trust Fund to a Junior ISA
What are Child Trust Funds?
CTFs were introduced in 2002, giving all new parents a £250 voucher to invest in a tax efficient savings or investment plan. Lower earning families received £500, CTFs were scrapped in 2011 and replaced by Junior ISAs. Since their demise the dormant CTF investment have offered a very poor return on investments as product providers focused on the new Junior ISA.
What are Junior ISAs?
Junior ISAs were launched in 2011 and offer better interest rates and a greater choice of investment products than those offered under a CTF. There is a limit to the amount that can be invested annually, currently £4,080 (2015/16), and proceeds cannot be accessed until the child turns 18.
What is changing regarding switching from a CTF to an ISA?
Prior to these changes anyone invested in a CTF was not allowed to switch their money to a new Junior ISA leaving many people forced to remain invested in dormant and poor performing accounts. To compound the problem investors were not allowed to withdraw funds or switch them to the new Junior ISA.
Under the new rules, transfers will work in the same way as ISA switches where the investor can instruct their CTF provider to switch funds into the Junior ISA of their choice. Transfer should be completed within 15 working days for cash accounts and 30 days for non-cash accounts. The full amount of the CTF must be transferred and the provider cannot refuse. To implement a transfer simply complete a transfer request form issued by the Junior ISA provider.
The best junior ISA accounts
If you are looking for a junior ISA here is a roundup of the best junior ISA accounts (cash or stocks and shares versions) available now.
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