Junior ISA – the New Kid on the Block

From 1st November 2011 any child born after 1st January 2011, or a minor under 18 born before September 2002, may have up to £3,600 per annum paid into a Junior ISA on their behalf, perhaps by Parents, Grandparents or anyone else who wishes to contribute towards their future.

The elegibility is a little complicated because children born between 1st September 2002 and 1st January 2011 received the benefit of a Government contribution or two to a Child Trust Fund, to which top-up contributions can still be made.

Both Cash and Investment JISAs will be available, up to the combined limit of £3,600 p.a. and given the long-term nature of this product at least some exposure to risk should be considered, using an equity based or multi-asset style of fund or funds.

Savings interest is tax-free whilst Investment gains are largely tax-free and the fund is available in full when the child reaches 18. Now therein lies the problem with JISAs – the child becomes absolutely entitled to the fund, in cash that very day should they choose, and that is a concern.

Ideally JISAs could be used to provide funds for University, gap year travel, a deposit on a first property, a first car or another major milestone in their young lives, but, let’s face it, they might just blow it all on short term gratification.

We strongly recommend saving for the long term, but much prefer to keep parents or grandparents in control by investing within a simple Disctretionary Trust, or by investing as an adult, perhaps using a normal ISA allowance and earmarking the money for one or more children.

The tax advantages may not always be the same, but what price do you put on control?

If you wish to discuss any aspect of investment, for you or your children, please contact us for an initial discussion or to arrange a meeting, with no cost or obligation.