How are junior ISAs different to child trust funds?
Child trust funds (CTFs) and junior ISAs (JISAs) are both designed to help you save for your child’s future.
If you're thinking about transferring money from a CTF to a JISA, it's worth being aware of how they differ.
In this article, we break down the similarities and differences between CTFs and JISAs to help you decide the best option for you and your family.
Key differences at a glance
| Junior ISAs | Child trust funds | |
|---|---|---|
| Who can open the account? | A parent or legal guardian | You can't open a new child trust fund. All eligible children would have had one open for them, either by their parents or by the government. |
| Who can have one? | Any child under 18 (under 16 for a OneFamily Junior ISA). | Any child born in the UK between 1 September 2002 and 2 January 2011. |
| Does the child receive money from the government? | No. | Parents of eligible children would have received a voucher from the government to open the account with. |
| What's the annual contribution period? | Resets at the end of the tax year. | Resets on the child's birthday. |
| How does the account mature? | When the child turns 18, the account becomes an adult ISA. | When the child turns 18, the account becomes a matured child trust fund. |
What are junior ISAs and child trust funds?
Junior ISAs and child trust funds are different types of savings products for children. Money put into a child's CTF or JISA can only be accessed by the child and only when they turn 18.
CTFs were a scheme started by the UK government. Children born between 1 September 2002 and 2 January 2011 were given a voucher to invest in a CTF. Parents could choose which CTF to put the voucher into, but if they didn’t choose then one was automatically opened for the child.
JISAs replaced CTFs when the scheme finished. You can still open a junior ISA for a child or you can transfer a CTF into a JISA. You must have parental responsibility to open a JISA and the child must be 15 or under to be eligible for a OneFamily JISA. Children can't have both a CTF and a JISA at the same time.
What are the similarities between junior ISAs and child trust funds?
Besides both being tax-efficient ways to save for your children, JISAs and CTFs share many similarities.
- They mature at the same time
For both JISAs and CTFs, the money will be locked in for the child until they turn 18. They can take ownership of their account when they’re 16.
- They have the same annual contribution limit
You can put up to £9,000 into either a CTF or JISA each year. For CTFs, the limit resets on the child's birthday. However, JISAs run tax year to tax year, so the limit resets each April.
- They can both be either cash or stocks and shares products
Money that you put into stocks and shares JISAs and CTFs goes into funds, which are invested in the stock market. This type of investment has good potential to grow over the long-term. It also means the value of your money could go down as well as up, so your child could get back less than has been paid in.
Cash JISAs and CTFs, on the other hand, aren't invested in the stock market so any money you put in is protected. It will grow based on interest rates, just like a current account. However, since inflation tends to be higher than interest rates, money in a cash JISA or CTF could be worth less in the future.
- They’re both tax-efficient
This means that no matter how much your money grows while it's invested in a JISA or a CTF, your child won’t pay any tax on the proceeds.
What are the differences between junior ISAs and child trust funds?
Despite their many similarities, CTFs and JISAs are still different in a few key ways.
- They mature differently
Both CTFs and JISAs mature when the child turns 18, but the way they mature is different.
When a CTF matures, it becomes a "matured CTF". JISAs, on the other hand, automatically become adult ISAs. When either product matures, the parent or guardian won’t be the registered contact for the account anymore and can no longer pay into it.
From the age of 16, children can take control of their CTF or JISA.
At 18, they’ll need to sign up to become the registered CTF account holder so that they can choose what to do with their investments. The child can then withdraw the money or transfer it into an adult savings product, like a Lifetime ISA or stocks and shares ISA. You can find out more about your child's options for when their CTF matures on our Next Steps guide.
For a JISA, when your child turns 18 it will automatically become an adult ISA. They can leave the money here if they wish, or they can withdraw the money or transfer some or all of it into another product.
Learn more about your child's options for their junior ISA when they turn 18.
- Child trust funds were part of a government scheme
When parents or the government opened a CTF, they would have started it with a voucher, usually for £250.
Some children received different amounts depending on factors such as their family's financial situation, any disabilities or when they were born - children born towards the start of the scheme generally received a higher amount.
Junior ISAs, on the other hand, are not given any government money.
- Their yearly contribution periods are different
As mentioned above, another difference between junior ISAs and child trust funds is their yearly contribution period.
Both products have a limit of £9,000 you can put in each year. However, while the child trust fund contribution period runs from birthday to birthday, the junior ISA contribution period resets at tax year end.
Should I transfer my child’s child trust fund to a junior ISA?
While child trust funds and junior ISAs are both tax-efficient ways to help save for your child’s future, they have some differences that might be worth considering.
Different providers might also offer different options, such as cash or stocks and shares and, in the case of stocks and shares, different investment fund options to choose from.
While you cannot open a CTF for your child, you can open a JISA for them. If your child has an existing CTF, you can transfer it to a JISA if you feel that is the best option for you. You can also transfer a CTF to a different provider.
If you hold other savings products and like to stay on top of your contribution limits, moving your child’s CTF to a JISA might make it easier for you to manage everything, since the JISA contribution period resets at tax year end, like your other products, while a CTF runs from birthday to birthday.
Why not transfer your CTF to a OneFamily Junior ISA?
With our stocks and shares Junior ISA you can start investing from just £10 per month up to a maximum of £9,000 each year on behalf of a child. Anyone can pay in, and the child will gain access to the account once they are 18 years old.
Stocks and shares JISAs have good long-term growth potential, but the value of your investments can go up or down and you child could get back less money than you’ve put in.
Find out more about junior ISAs
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