A Junior ISA is a long-term savings account set up by a parent or guardian with a Junior ISA provider, specifically for their child’s future.
They have all the same attributes as a normal ‘adult’ ISA – it grows tax-free and is available to withdraw tax-free.
They’re available for children below age 16 from birth. The current investment limit is set at £9,000 and this can be held in cash and stocks and shares. You can also transfer an existing Child Trust Fund into a Junior ISA.
Children aged 16 – 17 can take control of their Junior ISA but can’t withdraw the money until age 18.
There are two types of children’s ISAs available:
- Cash Junior ISAs
- Stocks and shares (investment) Junior ISAs
The option you choose will likely depend on your attitude to risk for the money for the child/grandchild and which of the product features are most appropriate for your circumstances.
We’d usually also take some time to consider the term of investment, for example, a JISA opened at a child’s birth will be invested for 18 years and an investment ISA may provide a more suitable option, over cash for this timeframe.
You don’t have to pick just one type, you can opt for splitting between the two different types, as long as you don’t exceed the current limit of £9,000 per annum.
We find that these plans work particularly well for clients who wish to save for children or their grandchildren’s future and would like the savings to be outside their own estate. They’re also typically clients who feel comfortable with the access to these funds becoming available at 18 for the children and with effectively giving away the control of the money in the long term.
For those worried about access and control, sometimes utilising a smaller amount of JISA allowance and saving in a different way for their children or grandchildren work better. The reality is if you save each year, it can accumulate to be a significant amount.
This is bespoke to each individual’s circumstances and if utilising JISAs for a family member of your own is of interest to you, we can discuss the pros and cons of this action.
This information is for general information only and does not constitute bespoke personal investment, tax, legal or other forms of advice. You should not rely on this information to make (or refrain from making) any decisions, instead, always contact Magenta to get financial planning advice for your own particular situation.
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