Child Trust Funds (CTFs) were introduced back in 2002 giving new parents receiving child benefit a £250 voucher to invest on behalf of their children. Some new parents on lower incomes got £500. The idea was to provide all children with a pot of money on their 18th birthday, helping them build a savings habit. Importantly, nobody but the child could withdraw the money.
If the vouchers weren't used within a year, HMRC set up a CTF on the child's behalf anyway. The CTF was invested and allowed to grow over the years. CTFs were scrapped in 2011 and replaced by Junior ISAs instead. They work in a similar way to CTFs but do not come with any type of government voucher. They're completely optional, so not every child will get one.
But many people born between 2002 and 2011 have a CTF, with an estimated £1.7bn across 430,000 CTFs currently unclaimed. According to the latest HMRC figures, the average CTF is currently worth approximately £2,000. So, if you were born between 2002 and 2011 or if you're a parent of a child born between these dates, read on to find out how to check if you have a CTF and how to transfer the funds to a Junior ISA.
How to find a Child Trust Fund (CTF)
If you know who your Child Trust Fund's provider is, you can contact them directly to track down the fund and see how it's performing. From there, you can make decisions about whether to leave it as is or transfer to a Junior ISA.
If you don't know who the provider is, or aren't sure your child has a CTF, you can use the free HMRC tool to check and track it down. Parents will need to provide their child's full name, address, and date of birth as well as any previous names the child may have used. If the child has a National Insurance number, this can be provided too to help track down the account.
Children over the age of 16 can track down their own CTF as long as they have their National Insurance number. They may also need to set up a Government Gateway User ID. This takes minutes and can be completed online.
Once you've submitted the form via HMRC, you'll be contacted within three weeks with the details of your Child Trust Fund provider. However, if you do not get this information within three weeks, you can reach out to HMRC by post.
What are Junior ISAs?
If you have a CTF for your child, you might want to consider transferring the funds to a Junior ISA. Junior ISAs were launched in 2011 and generally offer better interest rates and a greater choice of investment products than those offered under a CTF. This is because CTFs are an outdated mechanism now and financial providers aren't investing a lot of time and resources into making them an attractive choice for investors.
A JISA, on the other hand, offers more choice. They are a tax-efficient way to save for your child's future. You can save up to £9,000 a year tax free as long as your child is under 18 and living in the UK. There are two main types of Junior ISAs:
- Cash Junior ISAs
- Stocks and Shares Junior ISAs
You can open both types of Junior ISA for your child if you want, but you can only invest up to £9,000 across all Junior ISAs for your child. Once your child turns 18, the Junior ISA turns into a regular ISA and they can then withdraw the funds if they wish. The money is locked into the account until the child turns 18.
How to transfer a CTF to a Junior ISA
Your child can't have both a CTF and Junior ISA at the same time. So if your child has a CTF and you'd like to open a Junior ISA for them, you'll need to transfer their entire CTF first, and then close it.
The actual transfer is fairly straightforward. Once you have decided on the provider and the type of Junior ISA you want, all you need to do is fill out a transfer form with your new provider. Only the registered contact on the CTF can apply for the transfer. You'll also need your child's CTF details to do this. As long as you provide accurate details, your new provider will take it from there and complete the transfer.
You must be sure you want to take this step, however. For instance, you may decide it's not worth doing if the CTF is performing well and is due to mature in a few months. Once you transfer the CTF, you won't be able to reverse the decision which is why you should explore your options before committing to a decision.
What if I have a CTF and I'm over the age of 18?
If you've recently found out you have a CTF and you already turned 18, then you have what's known as a matured CTF. You have control of your CTF once you turn 18, and money can no longer be added to the account. As you're over the age of 18, you won't be able to transfer your CTF to a Junior ISA for obvious reasons.
At this point, you have two options. You can either withdraw the money and use it right away or you can transfer the money to another adult ISA or Lifetime ISA and keep building your savings. If you opt for an adult ISA, you can transfer up to £20,000 tax free. If you have less than £4,000 in your account and want to save for your first home, you can transfer it to a Lifetime ISA and benefit from a 25% government bonus. Once the CTF is transferred in its entirety, it'll be closed.
You don't have to decide what to do with your CTF right away. The money will be kept safe in the fund for as long as you want and nobody else will have access to the account but you. If you want to transfer your CTF to an adult ISA, you can check out some of the best ISA options on the market. We also regularly update our cash Lifetime ISA tables for those of you who want to start saving up for a house (or even retirement).
What are the best Junior ISA accounts?
The best junior ISA account for you and your child will depend on your risk profile and your savings goals. If you're more risk averse, you might opt for a cash Junior ISA where you get interest on your cash. This may be a good choice if your child is only a couple of years away from their 18th birthday and you don't want to risk market fluctuations eating into their savings.
If you're open to investing in stocks and shares, a stocks and shares Junior ISA could work well for you. With this type of Junior ISA your overall investment could go up or down depending on how the markets perform, but there's generally more scope for growth than with a cash Junior ISA, particularly if your child is a few years away from their 18th birthday and has time on their side.
If you're transferring a CTF, you might want to look at what type of CTF your child has currently (i.e. cash or stocks and shares). If it's been performing well and you're happy with the growth it's achieved so far, you may want to look at similar Junior ISA alternatives.
Whatever you decide, we have a roundup of the best junior ISA accounts (cash or stocks and shares versions) available now. We update these tables frequently to give you the most accurate information about the best Junior ISAs on the market right now.