60 second guide to Junior ISAs
The government has confirmed that the limit for Junior ISA accounts will increase to £3,600 per year. Junior ISA accounts will effectively replace Child Trust Funds. Parents, grandparents, family members and friends will soon be able to contribute to a new tax-advantaged savings scheme designed especially for children.
Junior ISA key points
- All UK resident children under the age of 18 who do not have a Child Trust Fund (CTF) will be eligible for Junior ISAs
- Any income or gains will be tax-efficient
- There will be no stakeholder Junior ISA account
- Cash and stocks and shares Junior ISAs will be available.
- There will be an overarching contribution limit of £3,600 per year which will be indexed by CPI from 6 April 2013 onwards
- Accounts will be owned by the child and funds will be locked in until the child turns 18.
- Junior ISA accounts will by default become adult ISAs on maturity
- There will be no government contributions or matched payments into accounts that the Child Trust Funds did
Junior ISA benefits
- Encourages saving for children beyond current levels and helps restore the savings culture in the UK
- Allows easier access to a much wider range of investments for children
- Allows exposure to longer-term risk-based assets like equities and fixed income, appropriate for the long-term nature of ISA investing
- Delivers certainty over legal ownership and rules of access at adulthood
- Conveys simple tax advantages during the period investing for the minor (similar to Child Trust Funds)
- Allows the child to enter adulthood with a built up tax-advantaged pool of savings which continue to remain tax-efficient until withdrawn
- Allow parents and grandparents to gift to children without tax disadvantage
- Allows payment of gross interest from funds, keeping administration simpler
Investing for Children
The Junior ISA announcement is an important step in the right direction by the government, one which people believe will strongly encourage parents to plan for their children’s future.
To help you navigate the new changes, there have been some good guides developed people with their Junior ISA and Child Trust Fund frequently asked questions.
About the author: George Pardew is a writer and fan of ISA accounts.
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