Investing for children – the junior ISA

Junior Individual Savings Accounts (JISAs) are new tax efficient savings vehicles for children that provide tax-free income and growth on certain qualifying investments.  UK children under 18 who do not have a Child Trust Fund (CTF) are eligible for JISAs. Anyone with parental responsibility for an eligible child can open a JISA for that child; however children who already have CTFs are not eligible.

Both cash and stocks and shares JISAs are available, and the range of qualifying investments is broadly similar to ‘grown-up’ ISAs.  The contribution limit is £3,600 per tax year and this can be split between cash and stocks and shares in any proportion (CTF contribution limits have moved up from £1,200 to £3,600 to be in line with JISAs).  The limit will go up with inflation from 6th April 2013 onwards.

Unlike grown-up ISAs where the investor can open and subscribe to new ISAs in each tax year, a child can only hold up to two JISAs (ie one Cash JISA and one Stocks and Shares JISA) in total.  Anyone can contribute to a child’s JISA.  When the child reaches 18 it effectively becomes and continues to exist as a normal adult ISA.  It is only at this point that the funds in the JISA can be accessed.

A person with parental responsibility manages the child’s JISA until age 16.  This person is known as the ‘registered contact’. Children have the right to manage their accounts (ie decide how to invest it) from age 16.  If you are a parent or a grandparent and you would like to save for an eligible child, the JISA would seem to be the savings plan of choice.

Disclaimer: This article is for general information only.  Do not act on its contents without seeking professional advice tailored to your particular circumstances.  Heritable Financial Planning are a trading style of Johnston Financial Services Ltd who are authorised and regulated by the Financial Services Authority.