Explained: Child Trust Fund and Junior Individual Savings Accounts

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Last year we heard the news that it had been announced by the Chancellor of the Exchequer George Osborne that the government will pass legislation to allow the merger of Child Trust Funds and Junior Individual Savings accounts. This has caused a lot of discussion and has become a hot discussion topic amongst many in the banking industry. It should be noted that if people wish to merge their funds then they can do this voluntarily, there is nothing that forces people to do such a thing. With so much being written in the newspapers and online about this piece of legislation, we though it only right that we break it down and explain exactly what a Child Trust Fund is and also a Junior Individual Savings Account. So here’s the beginners guide that will help you understand the basics.

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Child Trust Fund (CTF)

In simple terms this is a fund that is a long-term tax-free savings account that is available to children. You are no longer able to open these accounts, in the past all children that were eligible to hold one did so. Children born between september 2002 and and January 2011 were eligible to open these accounts. Now all children are eligible to open a Junior Individual Savings Account instead.

Junior Individual Savings Accounts (JISA)

Junior ISAs are very similar to the CTF, they too are long-term, tax-free savings accounts that are designed for children. To be able to get a Junior ISA you need to fulfil the following criteria; be under the age of 18 years old and be living in the UK. Once you have made sure you are eligible or your child is eligible for a Junior ISA then the next step is to choose which one you would like. There are two types of Junior ISAs. Firstly, there is a cash Junior ISA, this is great because it means that you will not end up paying any tax on the interest you accrue from the cash you save. The second is a stocks and shares Junior ISA, this means that the money that you save will be invested and you don’t have to pay any tax on any of the dividends you receive based on a calculator. If you like you can choose to have both types of Junior ISA, make sure you sit down and do your research before hand so you make the right decision. If in doubt then go and speak to a professional for advice.