Excite

Transferring child trust funds to junior Isas

Child trust funds were a really popular means of ensuring that your child could have a lump sum of money when they turned 18. However, as of 2011 children born after New Years Day 2011 were no longer eligible to avail of a child trust fund and for younger children, the Junior Isas took over. Here, we guide you through some options with regards to converting child trust funds to junior Isas.

To Transfer or Not Transfer, That is the Question!

Junior Isas have emerged as a new way of putting away money for your children. Current legislation dictates that a child that already has a trust fund is not allowed to open up a Junior Isa. It is also not possible to transfer the money in a Child Trust Fund into a Junior Isa currently.

Initially, the government have been extremly reluctant to allow parents to transfer child trust funds to Junior Isas. However, recent events suggest that they are willing to reconsider this blocking of transfers and that parents will soon be able, should they wish, to transfer the value of a Child Trust fund into a Junior Isa. This is the beginning of a process that will see Child Trust Funds and Junior Isas become one product and open to everybody, without restricions.

Before a decision is taken to transfer money, however, take a close look at the trust fund product you currently have. Many parents have invested their money in a fund with a low interest rate and these people rightly should be converting those funds into a higher earning Junior Isa pretty quickly. However, if you have a fund that pays a decent rate then you are better off continuing with that Child Trust Fund rather than switching to a Junior Isa as it may only pay a comparable rate.

The highest paying Child Trust Funds offer approximately 3% interest which is not a bad return. But with a bit of digging around you could be lucky enough to find a Junior Isa that pays between 5% and 6% should you meet certain criteria set out by some banks.

Shopping around is King

As always, shopping around and doing your research is key to securing the best rate for your childs future lump sum. If you are one of those parents just waiting to get out of low paying child trust funds to more profitable junior Isas then do your homework now and know which bank you want to open a Junior Isa with. Then, once the government green lights transfers of Child Trust Funds you will maximise your money's return.

United Kingdom - Excite Network Copyright ©1995 - 2017