Child Trust Funds are now closed to new applicants and have been replaced by Junior ISAs but that doesn’t mean they’re entirely redundant. Here’s what you need to know about the outgoing but ongoing Child Trust Funds.
In November, 2011 the Junior ISAs was launched as the long term replacement to the outgoing Child Trust Funds.
However, this doesn’t signal the death toll of the Child Trust Fund (CTF), in fact for the many thousands of children born between 2002-11 these accounts are still very much alive and kicking.
Are Child Trust Funds no longer available?
Child Trust Fund accounts are no longer being issued for children born after 3rd January, 2011.
However, if your child was born between September, 2002 and January 2011 they will have a Child Trust Fund account in their name.
These accounts will remain open and active until your child reaches the age of 18 and the account reaches maturity.
Originally Child Trust Funds were funded with a £250 voucher from the government; this was allocated in the form of a voucher.
If your child was eligible for a Child Trust Fund but you didn’t invest the Child Trust Fund voucher for them yourself, the government (specifically HMRC) would have done so on your behalf and sent you a letter with the details.
This means that if your child was born between September 2002 and January 2011 they will have a Child Trust Fund in their name with at least £250 in it.
If you don’t know the details of your child’s Child Trust Fund then you will need to contact HMRC to trace thier account. They will need personal details including your National Insurance number to verify your identity before they can provide you with information about your child's account.
This is really worth doing, as although the accounts are no longer being issued, existing Child Trust Funds will remain in existence until your child turns 18, unless the government changes its policy.
This means that your child's Child Trust Fund siill has several years left to run so it’s worthwhile getting the best deal possible.
Can I transfer a Child Trust Fund?
Although Child Trust Funds aren’t open to new applicants, you can still transfer your child’s existing Child Trust Fund to a different provider if you feel it’s not up to scratch.
If your child’s existing Child Trust Fund is a cash account you will need to check the interest rate on a regular basis to make sure it’s paying a decent interest rate. If not look to transfer the funds it to a different CTF offering a better return.
Equally if you child’s Child Trust Fund is invested you will need monitor its performance and consider switching if you feel it could perform better elsewhere.
However, any money held in your child’s Child Trust Fund cannot be withdrawn until they turn 18, only moved to a different CTF provider.
Make a note to undertake a detailed Child Trust Fund comparison on a regular basis, so your child continues to get a good return on their savings.
Should you still save in your Child Trust Fund?
Although Child Trust Funds provide a tax free home for your child’s savings there is no guarantee that they’re the best home for their money.
Firstly if you are saving for your child over the short term then a Child Trust Fund is unlikely to be the best choice, as any money you deposit cannot be withdrawn until they turn 18.
As Child Trust Funds are no longer open to new applicants, providers may not continue to offer good interest rates on existing accounts.
So, you may also be able to get a better return from other children’s savings accounts and investment opportunities so make sure you compare the Child Trust Fund deals with standard account to make sure you’re getting the best deal before your add any more money to their Child Trust Fund.
So what is a Junior ISA?
A Junior ISA is a type of tax-free savings account open to all children who don’t qualify for a Child Trust Fund - children under 18, born before Sept 2002 or after 3rd Jan 2011.
In many ways the Junior ISA is very similar to a Child Trust Fund in that any interest, profits or dividends from the accounts are tax fee, and any money you save for your child cannot be withdrawn until they turn 18.
However, unlike Child Trust Funds, no contribution will be made by the government towards your child’s savings.
To find out more about Junior ISAs read our guide: The Junior ISA: Your Questions Answered and to find the best account for your child you can compare Junior ISAs, using our Junior ISA comparison table.
Can you transfer a Child Trust Fund to a Junior ISA?
Presently it is not possible to transfer money in a Child Trust Fund to a Junior ISA.
However, the government haven’t ruled this out so it may be something that becomes available in the near future.
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