MoneyWeek article: Should you transfer your CTF to a JISA?

A Child Trust Fund could be one of your child’s longest-held investments — but that doesn’t mean it should be left on autopilot.”

Moving a CTF to a Junior ISA can provide a wider choice of investments and potentially lower costs. Some stakeholder CTFs can charge up to 1.5% a year, while some Junior ISA platforms charge no platform fee, although underlying fund charges can still apply.

You cannot hold both, so the CTF must be transferred in full and closed. Before moving, parents should compare charges, investment choice, performance and any valuable existing features.

For younger children, time can be a huge advantage. Investing over 10 or 15 years gives compound growth the opportunity to work, although investments will rise and fall in value.

There is also a valuable financial education angle. Involving children can introduce them to investing, markets and compounding early. Ultimately, the wrapper matters less than what you invest in, what it costs and how long it has to grow

For many families, transferring a Child Trust Fund (CTF) into a Junior ISA (JISA) makes sense. CTFs are legacy products - some charge up to 1.5% a year, and many offer limited investment choice or invest only in UK trackers. The youngest CTF holders are now 15, so on an average account of around £2,200, fee savings before 18 may be modest. The bigger consideration is the longer term plan for the money. It need not be spent at 18 and can remain invested tax free in an adult ISA for decades. A JISA can offer lower costs and much wider investment choice, giving access to a properly diversified portfolio that can be carried into adulthood. Saving can continue after the transfer, up to the current £9,000 annual allowance. If the money will be needed at 18, however, investment risk should be reduced accordingly.

The wrapper is the least important decision here. Yes, move it, a Junior ISA is cheaper and gives you more choice. That takes ten minutes. The harder question is what the money sits in afterwards. The Child Trust Fund is a good lesson in what governments do to savings. It was launched with a £250 voucher and a promise of a nest egg. Twenty years on, the average pot is about £2,200, and that £250 buys roughly half what it did in 2005. The state gave with one hand and inflated it away with the other. So the real risk to a teenager's savings isn't a 1.5% fee. It's holding cash or a UK only tracker for another decade while the pound loses value and the national debt keeps growing. A child with a 20 or 30 year horizon is the one investor who can afford to own things that hold value over time and ignore the noise. Move the account, then use it to teach them the one lesson school won't that money that isn't invested properly quietly disappears

It can make sense to transfer a CTF to a JISA. Better investment options, higher interest rates and more competitive fee structures are often the driver.

This is an all or nothing move though; you can't hold both so it's important to check if there are any special benefits that mean keeping the CTF is more attractive.

Parents can track down CTFs using the government tool here: https://www.gov.uk/child-trust-funds/find-a-child-trust-fund

Whether to move a Child Trust Fund into a Junior ISA is a call about funds and risk, so that decision sits with a regulated adviser, not me. But the timing is worth checking first. Every child who still has a live CTF is now 15, 16 or 17, so the deadline that matters is each child's own 18th birthday, not a shared cut-off years away. That kills the usual case for moving now to bank a long run of compound growth: there isn't nearly enough time left, for anyone. One real plus is that the transfer doesn't use up that year's Junior ISA allowance, so a family can shift a large balance and still pay in fresh money too. The catch is it's a one-way door: the whole CTF moves and the account closes for good. Either way, the child can take charge at 16 and the money becomes legally theirs at 18, so the switch changes where it sits, not who ends up with it.

It makes a lot of sense to have funds all in one place and ensure that charges aren’t unknowingly eroding the value of the Governments gift into the CTF. The most important is making long term money do what is possible rather than simply generate cash returns. As is often the case, the greatest risk people take is not taking enough, as thinking is too short term!

Two decades on, we finally have real evidence of how badly the average Child Trust Fund has underperformed, and it's worse than most people think. Around 78% of CTF accounts were placed in default 'stakeholder' funds, capped at a 1.5% annual charge that was sold as good value when the scheme launched in 2005. In reality, that's expensive for what's typically a basic UK tracker fund, and it's been eroding returns now that we have real numbers to look at, not projections. Over the same 15 years, the average fund in the Investment Association's global sector grew by around 240%, while stakeholder CTF returns tracked closer to the far more modest bond and mixed-investment sector averages. That's two decades of compounding working against these children rather than for them.

A modern JISA can cost as little as 0.15% to 0.35% depending on provider, so this isn't a marginal saving, it's the difference between a fund that's barely kept pace with inflation and one that's actually done its job.