CTF money to be allowed to move into Jisas
Money saved in child trust funds will be allowed to be moved into better paying junior Isas, the Chancellor has confirmed.
While the date of the rule change has yet to be confirmed, it is expected to come into force in April 2015.
Up until then, money being saved for 6.3 million children born between 1 September 2002 and 2 January 2011 continues to be locked away in CTFs paying no more than around 3% in interest, while the best-paying junior cash ISAs have paid around double.
The Chancellor said the move "supports hard-working families who want to save for their children".
Commenting on the news, Darius McDermott, managing director of Chelsea Financial Services, said: "Having failed to address the issue of the Child Trust Fund/Junior ISA imbalance in the Autumn Statement, it's great news this morning that the Chancellor has indicated that this problem will be addressed and transfers from CTF to Junior ISAs allowed.
"However, despite saying that the changes would be made 'as soon as possible' the expected date is not until April 2015, which is 16 months away. I can't understand why there needs to be further delays and would have hoped the changes could be made this coming April instead. We've clearly got some further campaigning to do in the new year."
He added: "As I've said before, I don't see why a child's date of birth should stop them getting the best deals for their financial future - and they should be getting them today, not in over a year's time."
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.