6th March 2015 at 11:55am
In a long-awaited development, old Child Trust Funds are due to be transferable to Junior ISA (JISA) accounts from 6 April 2015. *
After the launch of JISAs in 2011, the Child Trust Fund scheme closed to new accounts and it’s taken until now for the rules to become more flexible and open up JISAs to all children under the age of 18.
For many parents, this will allow them to equalise how they save for their children, where older siblings had a Child Trust Fund and the younger one qualified for a JISA. Around six million Child Trust Funds were opened.
A choice of cash or stocks and shares with your JISA
If you’re a parent looking to transfer a Child Trust Fund into a JISA you face two choices – cash or stocks and shares. What suits depends on the age of your child and your personal preference. And, of course, you can keep the Child Trust Fund if you wish to.
Over the long term, stocks and shares offer the potential for better growth, if you’re ready for some ups and downs in the stock market.
Over the long term, stocks and shares offer the potential for better growth, if you’re ready for some ups and downs in the stock market. In contrast, cash savings have more fixed potential for growth, linked to interest rates. Cash may give more reassurance over the short term, although inflation can eat away at its value over the long term.
If you are a parent with young children you may be more interested in stocks and shares, as you might have more than a decade ahead until the child turns 18, for example, and can aim for long term growth.
Equally, if your child is aged 15 and it’s likely the money will be needed at age 18 to pay for education costs, it’s easy to see that cash provides more certainty about what money you’ll get back in that short timeframe.
And if the idea of your teenager blowing the money on their eighteenth birthday is a worry, you can always put future savings into your own ISA instead. This means you’re in control of when anything is handed over, and the £15,240 ISA savings limit for 2015-16 gives you plenty of headroom to save for a range of things in one pot in a tax efficient way. You can’t transfer a Child Trust Fund to your ISA, however, so do keep that in mind. What suits you depends on your personal situation, and it’s great that parents will soon have more choice with children’s savings.
This blog and any responses to comments are not financial advice. A stocks and shares JISA, ISA or Child Trust Fund is an investment. Its value can go up and down and it may be worth less than you paid in. Laws and tax rules can change in the future and this blog reflects our understanding as at March 2015.
* The Deregulation Bill is in its final parliamentary stages as at 6th March 2015 and Royal Assent is expected before 5th April.