The Junior ISA (JISA) has been introduced to replace the Child Trust Fund (CTF), which was scrapped by the current government. Many have the opinion that families should be able to transfer a child trust fund into a junior ISA.
The Junior ISA (JISA) has been introduced to replace the Child Trust Fund (CTF), which was scrapped by the current government. It is possible to open an account under the name of any child who wasn’t entitled to the child trust fund, whether they were born before the child trust fund was introduced or after it was scrapped.
Those with a CTF are not able to have a junior ISA account opened for them but investments can still be paid into their CTF. In theory this means their child trust fund will continue to act as it was intended to but without the investment that used to be paid by the government once a child turned seven.
It remains to be seen what will happen with the child trust fund now that the junior ISA scheme has begun. Many fear that interest rates will not be as good with a child trust fund as with junior ISA’s. Some believe that providers will choose to focus on the junior ISA where they can generate new customers, rather than the CTF where they cannot.
There is one way that the child trust fund will be changing to keep pace with the junior ISA and that is in its limit. The maximum yearly investment that could be made with the CFT was £1,200, but with a JISA this has been increased to £3,600. Parents whose children have a child trust fund will now also be able to invest up to £3,600 a year. With both products this will increase with inflation.
Many have the opinion that families should be able to transfer a child trust fund into a junior ISA. This would mean that whatever interest rates do, the situation would be the same for children with each plan. Some have claimed that with keeping the CTF and JISA separate, it means that those with a child trust fund are being punished as the interest rates might not be so favourable. It is not the fault of children or their parents if they do not get the same rates; it would simply be because of the timing of their birth.
Child trust fund accounts being transferred into junior ISA’s would be fairly simple. It would not cost a lot and could make things easier for everyone. It could be argued that it would be better for investment companies as it is easier to keep everything together than to keep child trust fund accounts open even though it is no longer being offered as a new product. If interest rates do differ combining the two products would also be better for children with a child trust fund.
In a way it doesn’t seem to make sense to keep child trust funds and junior ISA’s separate. It would be simple to combine them and prevent the possibility of differing interest rates. This would stop some children being left with an old investment product that is no longer the focus of investment companies who had originally offered them.
Andrew Marshall (c)
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