Government Announces Changes to Child Trust Funds (CTFs) Rules


The government has made the announcement that children with savings in Child Trust Funds (CTFs) will be able to convert them to Junior ISAs, from 2015.

The labour government launched CTFs in 2005 but they were subsequently scrapped in 2011 when Junior ISAs were created for children under the age of 18.

Before today’s announcement, parents with CTFs were not allowed to open Junior ISAs for their children or transfer money across, despite Junior ISAs being more competitive than CTFs.

As an example, parents can typically get an interest rate of 3% on a CTF while the best interest rate on a Junior ISA is around 6%.

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Ultimately, this rule change will allow those suffering lower interest rates with CTFs to have a far greater choice of investment options. Indeed, the likelihood is that eventually there will be a full merger of CTFs with Junior ISAs.

Whilst we await further details of the announcement, parents and grandparents with CTFs are advised to continue saving in CTFs until April 2015 when they can be converted into Junior ISAs. However, if you are not pleased with your current CTF then you should consider transferring the value to another CTF. You should always shop around to ensure that you are still benefiting from a competitive interest rate and/or not paying excessive charges.

Currently up to £3,720 can be invested in a Junior ISA, split into any proportion between cash and shares. Importantly, the returns made are free of income and capital gains tax. When a child reaches 18, the Junior ISA is automatically converted into an adult ISA.

For more information about how Mitchell Charlesworth can help you with your savings and investments strategies, contact our Wealth Management division on tel: 0151 255 2300 or complete a quick enquiry form here.

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