Child Trust Funds: Is the End Nigh

The Government has issued a consultation on allowing transfers between Child Trust Funds (CTFs) and Junior ISAs (JISAs)

CTFs were one of Gordon Brown’s recurrent Budget ideas. They eventually became reality in April 2005, with the Government making payments of around £250 or £500 for children born after 31 August 2002. Parents and others could make top-up contributions, but few did.

In January 2011 the current Government stopped all payments to CTFs, saving around £500 million a year. The end result is that there are now over six million CTFs, with an average total contribution of under £320. The replacement for the CTF, the JISA, was launched in November 2011 and to date has not proved popular. It receives no government contributions, but does allow payments from parents and others totalling up to £3,720 in a tax year (2013/14).

Recently, the Treasury published a paper on the consequences of allowing CTFs to be transferred into JISAs. The Treasury’s preferred route is to permit voluntary transfers, operating in the same way as current CTF to CTF or JISA to JISA transfers. The paper floats the possibility of merging CTF into JISA to create a single tax-favoured savings product for children, but sees a number of difficulties with this option – not least that some CTF providers do not offer JISAs.