The change could benefit up to 6.1 million children who currently have savings in a Child Trust Fund. They may be able to get better returns on their investment, pay lower charges and have more choice of products by moving to a Junior ISA.
Junior ISAs often have better rates of interest. As of 19 November, the best interest rate for a Child Trust Fund was 3%, and the best interest rate for a Junior ISA was 6%.
Parents will have a greater range of Junior ISA options, as these are offered by a wider range of providers than Child Trust Funds.
There are currently 6.1 million Child Trust Funds, holding almost £5 billion in deposits. These will all be eligible for the transfer to Junior ISAs, of which there are currently 300,000, holding over £550 million.
Chancellor of the Exchequer George Osborne said: “The Government supports hardworking families who want to save for their children.
So I’m delighted that, as a result of these changes, over 6 million children who currently have savings in a Child Trust Fund will be able to benefit from better returns and lower charges on those savings in the future.
“The government is keen to allow these transfers as soon as possible, and expects the option to transfer will be available by April 2015. The legislation will be introduced in 2014. The announcement follows a public consultation on whether Child Trust Funds can be transferred to Junior ISAs.”
Junior ISAs were introduced in 2010, following the closure of the Child Trust Fund Scheme. Up to £3,840 per year can be put into a Junior ISA without tax being paid on any interest or gains. When a child turns 18, the Junior Account automatically becomes an adult account.