14th February 2022

The difference between a Childs Trust Fund and a Junior ISA

If you are looking to save for your children’s future you’ll discover that there are two most popular long-term savings and investment accounts. These are Junior ISA’s and Child Trust Funds (CTFs), which both provide an array of benefits when saving for your child’s future, whilst offering accessibility and ease. However, it’s easy to confuse the two or presume they are technically the same. There are a few subtle differences between the two, and depending on your financial goals, it can be worth looking into, to ensure you pick the correct option for you and your child. 

Here at the Children’s ISA, we compiled a list of the most common questions we’ve received about these popular saving plans, so you can find the answers – fast.

How similar are Child Trust Funds and Junior ISAs?
These accounts work in a similar way, they allow you to save money and earn tax-free interest for your child. One of the major benefits of both types of accounts is that every penny you put in belongs to your child and can only be accessed by them when they turn 18. However, in 2022 you can no longer open a Trust Fund for your child, but if you’ve owned a Cash Trust Fund for a number of years, it might be worth comparing the rates on the marketplace. The Child Trust Fund and Junior ISA annual allowance is exactly the same at £9,000, so you can invest the same amount. 

When were they introduced and why?
Child Trust Funds were introduced in April 2005, to encourage parents to save towards their Child’s future. Six years later, in 2011, they were replaced by Junior ISAs although you can still transfer a Child Trust Fund between providers and still pay into an existing one, keeping the account still active. 

What are the differences between Child Trust Funds and Junior ISAs?
Child Trust Funds offered the options of cash, shares and stakeholder, however, Junior ISAs only offer a Junior Cash ISA and a Junior Stocks and Shares ISA, for a more simple, streamlined approach. Parents can choose to open just one, or one each of these two types of Junior ISA. Also, the accounts differ when your child turns 18. A Junior ISA will automatically turn into an adult ISA, encouraging them to continue saving, a Child’s Trust Fund will pay them the balance upfront, giving them an influx of cash. 

Can you have a Child Trust Fund AND a Junior ISA?
If your child has a Child Trust Fund, you can keep it open, or transfer it to a Junior ISA, but you can’t hold both types at the same time. If you’re looking to get better value or you’re not happy with the performance of your Child Trust Fund, you could transfer it to a Junior ISA, with the Children’s ISA we have made this process easy, simply complete the online form and we’ll sort the rest.

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The website and the information contained therein should not be regarded as an offer or solicitation to conduct investment business in any jurisdiction other than the UK. Past performance is not necessarily a guide to future performance and the value of your investment may fall as well as rise, and any income received in the form of dividends may fluctuate. You may not get back the full amount when the account is closed. If paying regular monthly contributions please bear in mind that if contributions are not maintained you will be less likely to achieve the investment amount that was originally projected.

The information on this website is not advice, it is provided solely to enable you to make your own investment decisions. The investments and /or investment services referred to may not be suitable for all investors.

The Children’s ISA Limited is authorised and regulated by the Financial Conduct Authority. (FCA No: 563043)
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