The differences between a Child Trust Fund and a Junior ISA

If you're a parent in the UK thinking about saving for your child's future, you may well have come across the two terms Child Trust Funds (CTFs) and Junior ISAs (JISAs). Both are savings accounts designed to help families save tax-free for their children up to the age of 18, but while they share some similarities, they're not the same product.

A Child Trust Fund is a tax-free savings account set up by the UK government for children born between 1 September 2002 and 2 January 2011. The government made an initial contribution to kick things off, and while the scheme evolved over time and parents can still make contributions to an account, no new accounts can be opened. For more information, visit our easy-to-follow guide to Child Trust Funds.

Junior ISAs replaced CTFs when the original scheme came to an end, however no government contribution was made into these accounts. You can open a Junior ISA for any child under the age of 18, or transfer an existing CTF into one.

Important: A child cannot hold both a CTF and a Junior ISA at the same time.

What do Junior ISAs and Child Trust Funds have in common?

Despite their differences, Junior ISAs and Child Trust Funds have quite a bit in common, and knowing the similarities can help make sense of both.

Both are tax-free: Any money saved in either account grows free from UK income tax and capital gains tax.

The money belongs to the child: In both cases, the account is held in the child's name from the outset. A parent or guardian cannot claim the money at maturity; it belongs to the child and they are the only one who can claim it (unless there are extenuating circumstances). 

The money is locked away until 18: Neither account can be accessed before the child turns 18, except in cases of terminal illness. This makes both accounts a long-term way to save, giving the money time to grow without the option to dip into it early.

Anyone can contribute: Family and friends can make contributions to both a Child Trust Fund and a Junior ISA.

The child takes control at 16: At 16, the child has the option to become the registered contact on either account and begin managing it themselves, though they still can't access the money until they turn 18.

Both have the same annual allowance: The annual contribution limit for both is £9,000. The Junior ISA allowance works like other ISA products and aligns with the tax year (6 April to 5 April). The CTF allowance works differently and is calculated from the child's birthday to the day before their next birthday.

What are the differences between a Junior ISA and a Child Trust Fund?

If you already have an existing Child Trust Fund and you're wondering whether to keep your savings in a Child Trust Fund or transfer them to a Junior ISA, it's important to understand how the two accounts compare.

• Availability: Junior ISAs are open to any eligible child today, whereas Child Trust Funds are a closed product so no new accounts can be opened.
• Government contributions: CTFs came with a government voucher to get the account started. Junior ISAs receive no government contribution, they are funded entirely by parents, family, and friends.
• Provider choice: Junior ISAs have a much wider range of providers which can mean better interest rates and a wider variety of investment options to choose from.
• Transferability: You can transfer a CTF into a Junior ISA, but not the other way around.

Before transferring, it’s recommended you read the terms and conditions for any new product, as once you transfer, the CTF is closed and cannot be reopened.

How does transferring your Child Trust Fund to a Junior ISA with Unity Mutual work?

If you or your child have a Child Trust Fund and are thinking about what to do with the savings, transferring to a Junior ISA can be one option worth considering. 

Here's what to think about before making a decision.

What does transferring actually mean?

Transferring your Child Trust Fund into a Junior ISA means closing the Child Trust Fund and moving the full balance across to a new account. The good news is that the transfer doesn't count towards the child’s annual allowance, so their existing savings move across without affecting how much you can contribute to the new Junior ISA in that tax year, as long as you follow the official transfer process.

Why transfer to a Unity Mutual Junior ISA?

Unity Mutual's Junior ISA* is a stocks and shares account, meaning any money invested has the potential to grow over time. Our Equity Fund tracks the performance of over 600 UK companies, and while the value can go up as well as down, investing over the long term gives your child’s money the potential to outperform cash savings products. 

*Capital at risk.

Who can transfer a CTF?

To transfer a CTF to a Junior ISA, you will need to be the registered contact on the account. This can be the parent, guardian, or even the child themselves if they are 16 or above.

Who has responsibility for managing a Junior ISA or Child Trust Fund?

The rules around who can manage a Child Trust Fund or Junior ISA are broadly similar, but there are a few differences worth being aware of.

Important: If you don't inform your Child Trust Fund or Junior ISA provider of your maturity choice, what happens once you are 18 may vary from provider to provider. They may continue to manage the account or with a JISA they may move it into an adult ISA on your behalf. It is important to review your options and inform your provider of your maturity decision to ensure you have a savings solution that suits you.

Is the amount you can save in a Child Trust Fund different to a Junior ISA?

No, both accounts share the same annual allowance of £9,000. This applies whether you are saving into a Child Trust Fund or a Junior ISA, and covers contributions made by anyone, including parents, grandparents, and friends.

For Child Trust Funds, the annual contribution period is based on the child’s date of birth. It begins on their birthday and ends the day before their next birthday. This differs from Junior ISAs, which follow the UK tax year, which runs from 6 April to 5 April each year.

It's worth noting that any unused allowance does not carry over on either the CTF or JISA. If you don't reach the £9,000 yearly limit, the remainder cannot be added to the following year's allowance.

What's next for your savings?

Both Child Trust Funds and Junior ISAs offer a tax-efficient way to save for the future. The right choice will always depend on your individual circumstances. 

At Unity Mutual, we're here to help. Here are a few ways we can support you:

Open a Junior ISA: If you're looking for a tax-efficient way to save for a child's future, a Unity Mutual Junior ISA could be a good place to start.

Transfer your Child Trust Fund to a Junior ISA: Already have a Child Trust Fund and thinking about transferring? We make the process as simple as possible. Find out how to transfer your Child Trust Fund to a Unity Mutual Junior ISA.*

Access your Unity Mutual Child Trust Fund: If you've turned 18 and have a Child Trust Fund with Unity Mutual, you can now access your funds.

Get in touch: Got a question? If you'd like to speak to our friendly team, you can call us on 0161 214 4650.

Please note we can only provide factual information. If you're unsure whether a product is right for you, it's worth speaking to an Independent Financial Advisor (IFA).

You can find a local advisor at unbiased.co.uk. Keep in mind that financial advice may come with a fee, so be sure to ask about costs before receiving advice. 

*Terms and conditions apply. Invested in stocks and shares. Capital at risk.