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Ghosts of CTFs past


As hinted above, money can be paid into the Junior Isa by any person, subject to the annual limit of £3600. This limit applies across both types of Junior Isa, meaning £3600 can be paid into a cash Junior Isa or £3600 can be paid into a stocks and shares Junior Isa, or anywhere in between.

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A cash Junior Isa and a stocks and shares Junior Isa can both be held for the child at the same time, but only one of each type may be held.

This makes it particularly important to keep a track of the rate of interest being offered on a cash Junior Isa.

If the rate drops then it is not possible to subscribe to another cash Junior Isa and deal with the transfer of the existing cash Junior Isa at your leisure, the transfer must be completed first to avoid breaching the rule regarding holding two Junior Isas of the same type at the same time.

Junior Isas differ slightly from adult Isas in the flexibility to transfer from either the cash product to the stocks and shares product or vice versa. Rules prohibit adult stocks and shares Isas being transferred to cash Isas but there is no restriction on this with Junior Isas.

Once funds are in a Junior Isa they are pretty much locked away until the child reaches 18. The child can choose to take control of the account at 16 but, except in the case of terminal illness or death, the funds cannot be withdrawn until the child’s 18th birthday.

The fact that the child has the ability to do as they wish with funds in a Junior Isa at age 18 has been viewed as a weakness of the product by some commentators. Concerns that the carefully laid plans of the family for the funds to be used to pay for university fees or a deposit on a first home will be blown away as the child squanders the windfall on a summer partying in Ibiza need to be considered.

They are perhaps best addressed by financial education as the date upon which the money becomes available approaches.

How has the market taken to Junior Isas?

Well, several offerings in the direct to client market have been quick to launch but it is fair to say that developments have been slower in the adviser market. What are the main reasons for this?

First, it is an unfortunate fact that the Junior Isa has been launched smack bang in the middle of the lead-up to the retail distribution review. The development teams of many platforms and providers are focusing on being RDR-ready and resources are only likely to be diverted where there is a feeling that there will be a significant return on the work undertaken.