Changes to The Child Trust Fund Regulations and ISA Regulations have been proposed. Both sets of amended regulations, which are currently in draft form, are expected to be finalised later this month and come into force on 6 April 2015. The changes include updates to allow the transfer of a Child Trust Fund to a Junior ISA and provisions to allow spouses to inherit ISA tax benefits from their deceased partner.
These changes pose a number of operational considerations for organisations and consideration will need to be given to updates that may be required to documentation and internal processes.
This briefing sets out further detail on the draft proposals and what these mean for providers.
Child Trust Fund Transfers
In November 2014 the Government published draft amendments to the Child Trust Fund Regulations and ISA Regulations which allow the voluntary transfer of a Child Trust Fund (“CTF”) to a Junior ISA. Consultation was invited between November and December and a response to the consultation was published in December. Following the closure of comments on the draft Regulations, draft updates to the Guidance Notes for ISA Managers were published in January this year. Consultation was again invited on the draft Guidance Notes and the deadline for responses to these updates passed on Friday 20 February.
The draft Regulations contain the following updates:
- It will be possible to transfer savings from a CTF to a Junior ISA;
- The requirements on CTF providers or Junior ISA managers receiving certain bulk transfers of accounts are to be relaxed;
- Lifestyling of stakeholder CTF accounts will apply from the account holder’s 15thbirthday instead of their 13th birthday, as is currently the case; and
- Unless the account holder chooses to become the registered contact from their 16thbirthday, the existing registered contact will remain in this role.
Firms that offer a CTF and/or Junior ISA will need to consider these changes and the updates that will be required to terms and conditions, application forms, transfer forms and other investor facing documents. There will also be operational implications to consider.
The final Regulations and Guidance Notes are expected shortly so the full extent of any changes to these drafts is not yet known. We would advise that providers watch out for these final documents, having considered the drafts, and seek advice where required.
“Additional Permitted Subscriptions” for the spouse/civil partner of a deceased ISA holder
In its Autumn statement the Government announced plans to permit the surviving spouse/civil partner of a deceased ISA holder to have an “additional permitted subscription” equal to the value of the deceased spouse’s/civil partner’s ISA at the date of their death. The surviving spouse will be entitled to this additional permitted subscription regardless of whether or not they inherit any cash or assets comprised in the deceased spouse’s ISA and the entitlement to additional permitted subscriptions will apply in respect of ISA holders who died on or after 3 December 2014.
The draft Regulations stipulate that this additional permitted subscription must be made to an account (which can be a new account, an existing account or a mixture of the two) with the same ISA manager that held the deceased’s ISA. Any such subscription must be made within a specified period of time (generally three years from the date of death, although there are differences for ISA holders who die before 5 April 2015 or whose estate takes more than two and a half years to administer). The draft Regulations and Guidance Notes for ISA Managers contain details of the subscription processes and the information and declarations that will need to be provided by the surviving spouse/civil partner.
These changes pose a number of operational considerations for ISA managers. There is not a lot of time to fully consider these changes and their impact on any client facing documentation, such as terms and conditions and on-boarding packs, and internal processes as these are intended to take effect from 6 April 2015.
The deadline for comments on the draft Regulations was 20 February. The final Regulations and Guidance Notes are expected to be published in March so the extent of any changes to these drafts is not yet fully known. We would advise that providers watch out for these final documents, having considered the drafts, and seek advice where required.