ISAs for Children
The Junior ISA replaces Child Trust Funds, which are no longer available. Child Trust Funds were launched in 2005 and were available to children born between September 1, 2002, and January 2, 2011. There are an estimated six million child trust funds in Britain, each one holding on average £750. Parents of children with CTFs do not currently have the option to move their balance to a junior ISA to gain more attractive terms. However, this may soon change, allowing parents to transferring the £4.8billion currently tied up in child trust funds into Junior ISAs.
Children's ISA rules
- The child must not already hold a Children's Trust Fund (CTF) account.
- The child can have both a junior cash ISA and a junior stocks and shares ISA in any given tax year, as long as total amount invested during the year is no more than the annual allowance
- If child is under 16 someone with parental responsibility must open the Junior ISA
- Funds in the account will be owned by the child it is opened for and will be locked in until the child reaches 18
- Eligible children can hold one cash ISA and one stocks and shares ISA at a time
- Anyone can contribute to a child’s account at any time up to the annual limit
- All contributions to a Junior ISA are a gift to the young person and cannot be returned to the contributor later if they subsequently change their mind.
Advantages of children's ISAs
Junior ISAs provide parents, friends and family members with a convenient, tax-efficient way to save for a child's future. An added advantage is that the money saved in a junior ISA stays tax-free once the child reaches the age of 18.
Limitations of children's ISAs
If your child already has a Child Trust Fund, they aren't eligible for a junior ISA, and there's currently no facility to transfer money from Child Trust Funds into junior ISAs. Also, bear in mind that once your child reaches 18, the money is theirs to spend or save as they wish.