Not sure what to do with your Child Trust Fund?
Our ISA could be the answer
Transfer a matured Child Trust Fund
Turning 18 on or after 1 September 2020? Then you may be getting an extra birthday gift – your Child Trust Fund (CTF).
How much is in your CTF will vary. But one thing will be true. Keeping it in a tax-free account, such as an ISA, could help your one-off windfall grow to a lifelong nest egg.
At AJ Bell Youinvest, it’s easy to open an ISA and we’ll do the hard work when you move your CTF to us. New to investing? Our range of investment ideas are here to give you a little help, or a lot.
Which ISA is right for me?
Stocks and shares ISA
Cash ISAs and Stocks and shares ISAs are both tax-free. The difference lies in the returns you can hope to make. At the moment, most Cash ISAs pay interest of below 1%* – under the inflation rate. That means over time, your money won’t stretch as far.
A Stocks and shares ISA lets you invest your savings for the possibility of higher returns. Nothing is guaranteed with investing, and you could lose money as well as make it. But the longer you can invest for, the better the chance that your investments recover from short-term dips, and outperform cash.
Want to save for your first home? A Lifetime ISA gives you a generous Government bonus of up to £1,000 a year on what you pay in. You can also use the account to save for later life – so it can serve a dual purpose.
On the flip side, a Lifetime ISA is less flexible than a Stocks and shares ISA. If you take out money before age 60 that you’re not using to buy your first home, you’ll pay a Government withdrawal charge – which could leave you with less than you put in.
Also, if you choose to save in a Lifetime ISA instead of enrolling in, or contributing to, your workplace pension scheme you will miss out on the benefit of your employer’s contributions to that scheme and your current and future entitlement to means tested benefits may be affected.
You can only pay £4,000 into a Lifetime ISA each tax year. If there's more than that amount in your CTF, you could transfer £4,000 into a Lifetime ISA, and the rest into a Stocks and shares ISA so it stays tax-free.
How to transfer your Child Trust Fund
First, open a Stocks and shares ISA or Lifetime ISA – it only takes 5 minutes. To be eligible for an account with us, you must have already turned 18 and be resident in the UK.
To transfer your CTF, open an ISA below and download a transfer form during the application process.
Stocks and shares ISA
You can transfer in both cash and investments. The amount you transfer won’t count towards your £20,000 ISA allowance.
You can only transfer in cash – so you’ll need to sell your investments first, if you have any. The amount you transfer will count towards your £4,000 Lifetime ISA allowance.