What Is A Junior ISA?
An ‘ISA’ stands ‘Individual Savings Account’.
The main difference between an ISA and any other savings account is that it offers tax-free interest payments - this means you could get more for your money.
There is a limit to how much money you can put into a Junior ISA each year (£9,000).
There are 2 types of Junior ISA:
a cash Junior ISA, for example you will not pay tax on interest on the cash you save
a stocks and shares Junior ISA, for example your cash is invested and you will not pay tax on any capital growth or dividends you receive
You can have one or both types of Junior ISA.
Parents or guardians with parental responsibility can open a Junior ISA and manage the account, but the money belongs to the child.
The child can take control of the account when they’re 16, but cannot withdraw the money until they turn 18.
Even if you don’t have a Child Trust Fund right now - you can open a Junior ISA.
Junior ISAs are only available for those under 18. Therefore, if you have had a CTF and you are now over the age of 18, you can no longer switch to a Junior ISA - rather you may have to consider an adult ISA. However, if your child was born after 2nd January 2011, Junior ISAs are your only option as they replaced the CTF scheme.
So Should I Switch…?
While there is no requirement to transfer a Child Trust Fund into a Junior ISA it could work out better for your child’s savings in the long term.
Junior ISA’s generally offer more choice and better value, whether it’s higher interest rates on their cash accounts or lower annual fund management charges. This was because once CTFs were discontinued, financial companies tended to put more effort into attracting parents to Junior ISAs generally leaving those with CTFs with less investment choice and much steeper charges.
You can switch to a Junior ISA if you are the guardian/parent of the account. If you’re 16 and older, you can do this yourself.
You can check out the best Junior ISA’s here: