dad holding baby saving for children with a child's saving plan

From April 2015 parents will be able to transfer their child’s CTF to a Junior ISA, which has much better interest rates and may be better value for money for some families.

The change could benefit up to 6.1 million children who currently have savings in a CTF.  They may be able to get better returns on their investment, pay lower charges and have more choice of products by moving to a Junior ISA.

The introduction of the Child Trust Fund

Child Trust Funds were introduced by Tony Blair’s Labour administration in 2002.  They gave every child in Britain, who was born between 1 September 2002 and 2 January 2011, a voucher worth £250, with the aim of encouraging saving. In addition to this the parents of those children were also given another voucher, again worth £250 for their CTF, when they turned seven years old.  Some lower income families received more.

The £250 seed money and the additional CTF top-up were discontinued in 2011 by the Coalition government, including the top-up payment of £250.  It was replaced by the Junior ISA.

Those who had opened a CTF could still continue to save into a one; however they were no longer available to new customers.   Those looking to save efficiently for their children would now be able to save with a Junior ISA.

As of 1st April 2015

Six million children who hold CTFs, which currently offer lower interest rates and returns on investments, will be able to benefit by transferring their fund to a Junior ISA. This includes their £250 seed money and any money that may have been paid in since.

As of 19th  November 2013, the best interest rate for a Child Trust Fund was 3%, and the best interest rate for a Junior ISA was 6%.

CTFs have been in decline since the Junior ISA was introduced, and because the Junior ISA can be better value for money, experts have predicated that there will be a large number of transfers.

Chancellor of the Exchequer George Osborne said:

“The Government supports hardworking families who want to save for their children.

So I’m delighted that, as a result of these changes, over 6 million children who currently have savings in a Child Trust Fund will be able to benefit from better returns and lower charges on those savings in the future.”

If you have any questions about your Child Trust Fund and the changes, which are due to take place next year, please get in touch or visit our website for regular updates.