The Chancellor’s Autumn statement disappointingly gave no mention of plans to help the 6 million child savers with under performing Child Trust Funds. Mr Osborne however, over the Christmas break, broke silence on the matter by announcing that in 2015 all children with Child Trust Funds (CTFs) will be able to transfer these to more competitive Junior ISAs.
Why are Junior ISAs better than Child Trust Funds?
When Child Trust Funds were launched in 2005 they offered the best solution to long-term savings for children, however after the introduction of Junior ISAs in November 2011 it was clear that anyone with a CTF was not getting the best deal. Aside from higher charges and lower interest rate on CTFs the main issue with these accounts is the lack of choice when compared to Junior ISAs.
We regularly keep an eye on current savings rates across a range of children’s accounts and young savers with Junior ISAs can benefit from interest rates of up to 6% tax free, which is considerably more than the top CTFs are offering. You can view our up-to-date saving account tables here.
Take away points
Financial institutions are expecting to be able to transfer CTFs to Junior ISAs from April 2015, so it is well worth putting this date in the diary as the sooner children make the change the sooner they can benefit from a higher rates.
Junior ISAs are the most tax-efficient way for children to save money (up to £3,720 rising to £3,840 from April 2014), however they are a long term investment, you can read more about this here…
There are two types of Junior ISA: Cash Junior ISA and Stocks and Shares Junior ISA. You can read more on the benefits of both Junior ISAs here.
Roosterbank.com is designed to get children into good savings habits early on and encourages children to regularly add a proportion of their pocket money to their saving account.