Are savings for a child confusing? Does a Child Trust Fund (CTF) still exist, and should a lump sum go into a Junior ISA (JISA) or NS&I Premium Bonds? This guide explains, in plain British English, the practical differences, transfer routes, likely returns and the steps an adult needs to take today.
Key takeaways: what to know in one minute
- If the priority is access at 18 and tax-free growth, a Junior ISA (JISA) is usually best for most families because it offers tax-free interest/gains and flexible provider choice.
- If the priority is capital security with chance of tax-free prize, NS&I Premium Bonds are suitable but expect uncertain returns; estimate an equivalent low single-digit annual yield depending on prize rates.
- If a child already has a Child Trust Fund (CTF), it can be transferred to a JISA or left as a CTF; transfers are straightforward but require correct provider forms and ID.
- For short-term goals (<5 years) prefer cash JISAs or Premium Bonds for security; for long-term growth (10+ years) consider stocks & shares JISA for higher expected returns.
- Compare fees, rules at 18 and transfer times before acting; Premium Bonds have no fees but returns are probabilistic; JISAs may have platform or fund costs.
Which types of ISAs suit children's savings?
A child can hold a Junior ISA (cash or stocks & shares) or Premium Bonds can be held in the child's name via NS&I. Children born between 1 September 2002 and 2 January 2011 may still hold a Child Trust Fund (CTF). Important differences:
- A Junior ISA is a tax-free savings account designed for under-18s. There are two main types: cash JISA and stocks & shares JISA. Money is locked until the child turns 18, when it becomes their adult ISA.
- Child Trust Fund accounts were issued by the government between 2005 and 2011. They also offer tax-free growth but are now closed to new accounts; existing CTFs can be transferred into a JISA.
- Premium Bonds are not an ISA but are tax-free for UK residents because prizes are not taxed. They offer capital security but no guaranteed interest — instead tax-free prizes are awarded randomly.
Key practicalities: the annual contribution limit for children's allowances is the JISA allowance, which is set each tax year (indicative at time of writing); parents, guardians or trustees must manage accounts until the child is 18.
Cash ISA vs stocks and shares ISA explained for junior accounts
- Cash JISA: low risk, interest paid tax-free. Best for short-term goals or capital preservation. Returns track bank savings rates and can be low in real terms after inflation.
- Stocks & shares JISA: invests in markets. Higher expected returns over the long term, but capital can fall in the short term. Suitable for long-term goals such as university or first home deposit.
Costs vary: cash JISAs generally have no product charges; stocks & shares JISAs often have platform fees (flat or percentage) and fund ongoing charges (OCF). Always compare the total expense ratio and any custody or exit fees.
How Junior ISAs differ from Child Trust Funds
- Date of issue and eligibility: CTFs were issued to children born between 1 Sept 2002 and 2 Jan 2011; JISAs cover children born after 3 Jan 2011 and can accept transfers from CTFs.
- Provider choice: many original CTF providers continue to manage accounts, but a CTF may be transferred to a JISA for broader investment options or lower charges.
- Terms at 18: both convert to adult assets at 18, but the process differs depending on provider. For a CTF moved into a JISA, the child will typically gain control at 18 in the same way as other JISAs.
Practical point: if a child has a CTF, the parent or guardian should check the provider, compare charges and consider transferring to a JISA only after checking transfer forms and any promotional exit conditions.
Lifetime ISA and other adult ISA options (brief context)
A Lifetime ISA (LISA) is an adult product and not appropriate for children's savings, but it matters for families planning a wider strategy:
- A LISA offers a government bonus for adults saving for their first home or retirement; it cannot be opened for a child and does not replace a JISA.
- When the child turns 18, the funds in a Junior ISA will convert to an adult ISA; the individual could then choose to transfer some of that capital into a LISA if eligible and seeking the bonus for a first home (subject to LISA rules and limits).
This context helps families plan for life-stage transitions but does not change the core comparison between CTF, JISA and Premium Bonds for under-18s.
Comparing ISA returns with NS&I Premium Bonds: expected outcomes
Premium Bonds offer tax-free prizes instead of interest. NS&I publishes the prize fund rate (indicative annual equivalent rate) but individual outcomes are random. To compare:
- Equivalent yield concept: treat the published annual prize fund rate as an average expected return across a large portfolio. For small holdings, variance is high: many bond-holders win nothing in a year.
- Predictable vs probabilistic: cash JISAs give predictable modest interest; stocks & shares JISAs give an expected higher return with volatility; Premium Bonds give uncertain returns with the safety of capital.
Example scenarios (indicative at time of writing):
- £1,000 in a cash JISA earning 1% = ~£10 per year.
- £1,000 in a stocks & shares JISA with 5% average return = ~£50 per year (but with ups and downs).
- £1,000 in Premium Bonds with a 1.4% prize fund rate might yield an average of £14 expected prizes, but actual results could be zero in many years.
For children saving a regular amount over 10–18 years, a stocks & shares JISA usually produces the highest median outcome, but a family's risk tolerance determines the right choice.
Choosing the right ISA or Premium Bonds for short or long-term goals
- Short-term (<5 years): prioritise capital security. Use a cash JISA or Premium Bonds. Cash JISAs pay interest regularly; Premium Bonds offer chance of prizes but unpredictability.
- Medium-term (5–10 years): consider a blended approach. A portion in cash JISA for near-term needs and some in stocks & shares JISA for growth.
- Long-term (10+ years): favour stocks & shares JISA for greater growth potential; volatility is smoothed out over time.
Decision matrix:
| Goal |
Risk tolerance |
Recommended vehicle |
Why |
| Short-term spending (school, teens) |
Low |
Cash JISA or Premium Bonds |
Capital security; Premium Bonds add prize chance |
| University or house deposit (10+ years) |
Medium-high |
Stocks & shares JISA |
Higher expected returns over long horizon |
| Lump-sum gift with no access need until 18 |
Varied |
JISA transfer from CTF or Premium Bonds |
Choice depends on desire for probabilistic prize vs chosen investment strategy |
How to transfer a Child Trust Fund to a Junior ISA or Premium Bonds (step-by-step)
Transferring a CTF is a common practical action. The main steps are:
- Check the existing CTF provider and current value. Some providers will provide a transfer form and give details on timing.
- Choose the receiving product (cash JISA, stocks & shares JISA or Premium Bonds). Compare fees, investment choices and transfer times.
- Open the receiving account in the child's name with the chosen provider. Do not withdraw funds yourself — transfers must be done by the providers.
- Request a transfer using the receiving provider’s transfer form. The receiving provider usually contacts the CTF provider.
- Wait for completion (timings vary, typically 5–30 working days depending on assets and paperwork). For investments, in-specie transfers may take longer.
This step-by-step process is also formulated below as a HowTo schema for search engines.
Transfer checklist: CTF to JISA or Premium Bonds
- 🔎 Confirm provider: note CTF provider name and contact details
- 📑 Gather ID: child’s birth certificate/NINO if requested
- ✍️ Open receiving account: choose cash/stocks JISA or NS&I
- ➡️ Submit transfer: use the receiving provider’s form (do not withdraw)
- ⏳ Track completion: expect 1–6 weeks depending on assets
Advantages, risks and common errors
✅ Benefits and when a product suits
- JISA (cash): safe, predictable, tax-free interest — suitable for low-risk families and short-term needs.
- JISA (stocks & shares): best expected long-term growth — suitable for long-term objectives and higher risk tolerance.
- Premium Bonds: capital security + chance of tax-free prizes — suitable for cautious savers who accept uncertain returns.
- CTF to JISA transfer: can reduce fees or widen investment options.
⚠️ Risks and errors to avoid
- Ignoring fees: failing to compare fund OCFs and platform charges in a stocks & shares JISA can erode returns.
- Needing money before 18: JISAs are locked until 18; if likely needed earlier, choose cash JISA or keep separate accessible savings.
- Over-relying on Premium Bonds: small balances have a high chance of producing no prizes; Premium Bonds are less effective for reliable compound growth.
- Incorrect transfer steps: withdrawing a CTF and then re-depositing breaks tax-free status; always use provider-to-provider transfer.
Practical comparisons and scenarios
Scenario A — a one-off £2,000 gift, planning to hold 15 years:
- Stocks & shares JISA projected median growth (illustrative): higher than cash; recommended if comfortable with market risk.
- Premium Bonds: possible tax-free prizes, but expected equivalent return may be lower than stocks & shares over 15 years.
Scenario B — saving £50 per month for 5 years for a course deposit:
- Cash JISA provides security and small interest; Premium Bonds add a prize element but lack predictability. For a 5-year horizon, capital certainty is typically preferable.
These examples are illustrative; exact outcomes depend on future market returns, prize rates and interest rates. Sources: Junior ISA guidance, NS&I Premium Bonds.
Frequently asked questions
What is the difference between a Child Trust Fund and a Junior ISA?
A Child Trust Fund is an older government scheme for children born 2002–2011; a Junior ISA is the current tax-free account. A CTF can usually be transferred to a JISA.
Can a Child Trust Fund be transferred to Premium Bonds?
Yes. Providers can transfer funds from a CTF to an NS&I Premium Bonds account, but the receiving provider must be able to accept transfers; follow provider transfer forms.
Who controls a Junior ISA until the child is 18?
The registered contact (parent, guardian or person with parental responsibility) manages the account until the child reaches 18, when control passes to the child.
Are Premium Bonds taxable for children in the UK?
Premium Bond prizes are tax-free for UK residents, including children; there is no tax on winnings and no need to declare them to HMRC.
How much can be saved each year in a Junior ISA?
The annual Junior ISA allowance is set by the government and changes each tax year; check current limits on GOV.UK.
Do Junior ISAs have charges?
Cash JISAs usually have no fees; stocks & shares JISAs often have platform fees and fund OCFs which vary by provider and fund choice.
What happens to a Junior ISA at 18?
It converts into an adult ISA held by the now-adult child; they gain full control and can withdraw funds or transfer them between ISAs.
Are returns on Premium Bonds guaranteed?
No. Premium Bonds do not pay interest; returns depend on random prize draws. The capital value of bonds is secure (the original stake is preserved).
Your next step:
- Check whether the child has a CTF and note the current provider and balance.
- Decide on the goal horizon (short, medium or long term) and risk tolerance, then shortlist 2 providers for a JISA or consider NS&I Premium Bonds.
- If transferring, open the receiving account and request the provider-to-provider transfer — avoid withdrawing funds manually.