What are Junior ISAs and are they worth investing in?
Saturday, 29 October 2011 11:02
Junior Individual Savings Accounts are being launched on November 1st and up to six million children are eligible to invest in a Junior ISA.
Junior ISAs allow parents to put away up to £3,600 each year tax free. If a parent invested this much each year and received interest of five per cent on average each year, the fund would blossom to a total of £123,000 by the time the child reached 18.
Unlike the scheme it is replacing, child trust fund accounts, the government will not make a contribution to each new junior ISA taken out by a parent on behalf of their child. However, each child will be able to run and invest in both a cash and a stocks and shares account and switch funds between the two.
Research from the Association of Investment Companies (AIC) has shown that 43% of parents who are planning to open a Junior ISA for their child want exposure to stocks and shares.
Tom Stevenson, Investment Director, Fidelity Worldwide Investment, commented: "The Junior ISA will bring to parents and children a unique and compelling set of benefits and tax advantages. Nothing else allows a child to own investments in their own right in a completely tax efficient way and it will be the only savings vehicle that will enable children to roll their investments into another tax-free wrapper at the age of 18.
Many savings providers are launching new deals to take advantage of the publicity surrounding the launch next week and we take a look at some of them:-
Nationwide Building Society is, from Tuesday 1 November 2011, launching its new Smart Junior Cash ISA. Nationwide's Smart Junior ISA pays an overall rate of 3.00% AER tax-free (variable), which includes an introductory fixed bonus of 0.90% until 31 October 2013.
Skipton Building Society new Junior ISA pays 3.00% tax free pa/AER. It is a ‘no-strings’ product that just pays three per cent and does not include a bonus rate.
Bestinvest have a Junior ISA that offers a £300 discount for all parents via a cashback offer that is available to all parents or guardians who apply by November 30th. The offer is restricted to one cashback payment of £300 per household.
Although there has been some criticism that the removal of government cash given to all parents who opened a child trust fund is likely to discourage parents from opening a junior ISA, this new product still enables children to earn a large tax-free sum by the time they are 18 and they are also allowed to run the account from the age of 16. The ability to be able to switch funds between cash and stocks and shares ISAs is also a useful feature.
Use the Myfinances.co.uk comparison tables to find the best deal on a savings account for a child.
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