Posts Tagged ‘JISA’
What is an ISA?
In this article, Scottish Friendly look at the different types of ISAs available. If you’re considering setting up an ISA, either for yourself or for a child, the good news is that the process is fairly straightforward.
ISAs explained
An ISA is basically a tax-free wrapper that allows you to shelter your money from the taxman. There are three different types of ISA available — a Cash ISA, a Junior ISA and a Stocks and Shares ISA (sometimes called an Investment ISA).
With all types, any interest earned on savings or bonds and any capital gains made on investments within the ISA are tax free. Because of the tax breaks, there are limits on the amount that can be invested in each tax year. How much depends on the type of ISA you choose. Tax treatment depends on individual circumstances and tax law may change in the future.
What is a Cash ISA?
Usually offered by a bank or building society, a Cash ISA is a savings account where the interest isn’t taxed. Because of this, a Cash ISA can, in some cases, offer a higher rate of interest than taxed accounts from the same bank or building society. There are a variety of Cash ISAs to choose from, such as instant access, fixed rate and accounts with base rate guarantees.
How much can you put in a Cash ISA?
You can invest up to £5,640 in a Cash ISA in the current tax year (2012/13). As the maximum annual ISA allowance is £11,280, you can invest an additional £5,640 in a Stocks & Shares ISA.
What is a Junior ISA?
A Junior ISA (JISA) lets family and friends make long term tax-free investments for a child. Children under the age of 18, who didn’t qualify for a Child Trust Fund, are eligible. The JISA is held on behalf of the child, until they reach their 18th birthday. At that point, they may withdraw their money – the money in the account can only be taken out by the child – or allow the JISA to turn into a full adult ISA. Once set up, anyone can contribute to a JISA including friends, grandparents and family.
Types of Junior ISA
There are two types available — a Cash Junior ISA and a Stocks & Shares Junior ISA. A Cash Junior ISA works in the same way as a bank account where the money you pay in gains interest according to the bank’s rate.
The Scottish Friendly Junior ISA is a Stocks and Shares Junior ISA. In the case of this product, you can invest from as little as £10 a month, lump sums from just £50, or a mix of both. Your money would be invested in the stock market, so the value could go down as well as up.
How much can you invest?
The total amount you can invest is up to £3,600 in the current tax year (2012/13), less any amounts you may be saving in a Cash Junior ISA.
What is a Stock and Shares ISA?
A Stocks and Shares ISA – also referred to as an Investment ISA – invests your money in the stock market, in investment funds or individual stocks and shares. This type of ISA aims to provide capital growth in the longer term. It’s important to remember that your money is invested in the stock market, so the value can go down as well as up.
How much can you invest?
The total amount you can invest is up to £11,280 in the current tax year (2012/13). This is the maximum annual ISA allowance. You can choose to put the full allowance into a Stocks & Shares ISA or hold up to £5,640 of the allowance in a Cash ISA with another ISA manager.
You can invest from as little as £10 a month with a My Choice (ISA) from Scottish Friendly - or you can get started with a lump sum payment from upwards of £100 with this plan. Remember, the value of the My Choice (ISA) can go down as well as up and your original investment is not guaranteed. Please also note that tax treatment depends on your individual circumstances and the levels and basis of taxation may change in the future.
Scottish Friendly has provided no advice in relation to these plans. If you are in any doubt as to whether a plan is suitable for you, you should contact a financial advisor for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk Advisers may charge for providing such advice and should confirm any cost beforehand.
Children’s pensions should not be seen nor heard
Google Children’s Pensions and you’ll get a consistent result with Virgin Money at the top. Now before I go any further let me state for the record I love the Virgin brand, I love Virgin Trains and Virgin Atlantic and have sincere respect for Virgin Money. I recall that they were one of the early adopters of passive versus active fund management and played a great role in calling into question the value added by so-called active fund managers.
Which is why I can’t see the logic in them tarnishing their brand with the flawed concept of children’s pensions.
I can see why they’ve gone for it. It’s almost virgin territory (see what I did there) so it gives them a place in the market. It’s also an interesting concept to play with from a PR point of view; using tax relief and the magic of compound interest over 60 years. it’s possible to show how “easy” it is to set up a child as a pension millionaire.
Yes it’s flawed and how much will a million quid be worth in 60 years time? Indeed how much of a pension will a million quid buy you in 60 years time? But hey who is counting, it gets you cheap headlines and there is nothing better on a slow news day.
But that’s the point, with children’s pensions it’s cheap but in my view it’s also nasty. A popular consumer brand should not spend its time trying to pretend that this is anything other than a highly niche product.
Why in God’s name would anyone invest for a child in a pension pot when there are far better alternatives.
Firstly pension benefits are going to be locked away for up to 55 years (on current legislation). Who knows what the legislative landscape will look like by 2067! That million quid in pension benefits may all be means tested away meaning that all that hard invested money has gone to waste. Indeed you may not make it that far, who is to say that pensions may be subject to a tax raid by the government, it’s happened before. So would you trust the government with your kids money for nearly two life sentences?!
Secondly even if you are fixated with the concept of getting a pension set up for your kids the ISA first strategy screams at you to invest their money in a JISA. You can then switch that money to a Pension when the child is a higher rate taxpayer, or at least leave things until the last minute (before the “child’s” retirement) before switching to a pension – at least then they’ll be able to do so in the light of the legislative landscape at the time and work out whether it is worth switching to a pension.
Even if the JISA route has been exhausted, and at a £3,600 a year limit we are talking about wealthy individuals now, there are simple enough trust routes that can be used to incubate investments for children allowing them to be switched to a pension in later life if the ISA first strategy so dictates.
Children’s pensions are an exceptionally niche product. If Virgin are going to advertise them it should be in the same places that they advertise Virgin upper class flights. Come on, you are starting a new relationship with money, why not show it by turning your back on a cheap bit of PR and a dreadful product.
Junior Individual Savings accounts – know the facts
In this article Scottish Friendly looks at Junior ISA facts. If you’re uncertain about how to set up a Junior Individual Savings Account for your child – don’t be: the good news is that the process is straightforward and it can be a great way to save or invest money, tax-free.
The Junior ISA is often confused with the Child Trust Fund – but as of 1st November 2011, the CTF was discontinued and replaced by the JISA. If your child already has a CTF they will be unable to hold a JISA at the same time. If you haven’t yet opened a JISA for your child, and are looking for information, take some time to read our guide.
The Basics:
- Eligibility: any child that is a UK resident and who isn’t eligible for a CTF may hold a Junior ISA. Children born on or after the 3rd January, 2011 are eligible for a JISA. Those still under the age of 18 who were born before September 2002 are also eligible.
- Age limit: you can invest on behalf of a child under 16. The JISA is held on behalf of the child, until they reach their 18th birthday. At that point, they may withdraw their money – the money in the account can only be taken out by the child – or allow the JISA to turn into a full adult ISA.
- Save or invest: the JISA, like the adult ISA, can be held in two categories – a ‘Cash’ savings product or a ‘Stocks and Shares’ investment product. A child may hold both types of account, subject to the annual subscription limit. Money within a cash JISA is protected and you’ll get out exactly what you put in (plus any interest due). A Stocks and Shares JISA, like any investment product, involves risk – stock market investments can rise and fall and the child could get back less than you have paid in.
- Tax free wrapper: the interest or returns a JISA generates are free from income or capital gains tax (tax is deducted from UK share dividends). This means the money you invest within a JISA could work hard for your child and not the tax man. Tax treatment depends on individual circumstances and tax law may change in the future.
- Subscription limit: at present, the limit on the amount of money you may save or invest tax free in a JISA each tax year for a child is £3,600. This amount may be split across the Stocks and Shares or Cash JISAs a child holds.
Why a JISA?
A Junior ISA is a way of building up a fund for your child to use at a time when they may need it most. At 18, children may be thinking about university, travelling or becoming more independent. A JISA could give them a head start in whatever direction they choose to go.
Once set up, anyone can contribute to a JISA: friends, grandparents and family. A contribution towards a child’s future could be an ideal birthday or graduation gift and one which will be all the more appreciated when the child turns 18 Sit down with your child in mind and think about what your savings or investment goals might be for their future. A JISA is a long-term plan and could be a useful way of demonstrating good financial practice. It’s never too early to get your child thinking about financial responsibility and, with a Junior Individual Savings Account, they have the option to be involved in planning for their own future when they turn 16.
Scottish Friendly has provided no advice in relation to these plans. If you are in any doubt as to whether a plan is suitable for you, you should contact a financial advisor for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk Advisers may charge for providing such advice and should confirm any cost beforehand.
Family Savings and Investments
If you have a family, or are planning one, it can be hard enough looking after your finances in the present, never mind thinking about the future. The good news is there are plenty of options open to anyone who wants to set up a family savings and investment plan – the real trick is finding a strategy that gets the most out of the money you put in.
A family savings or investment plan could deliver a level of peace of mind and may help deal with any expected and unexpected financial burdens which may occur. The cost of education is set to rise and if your children are thinking about university, having money in place to help pay fees can be very useful. Savings and investment plans are also useful for medical costs, travel, nest eggs for your child, or simply setting up a fund to help you enjoy retirement! You must remember that with any stockmarket related investments, your investments may fall as well as rise and your original investment is not guaranteed.
What are your options?
If you’re specifically thinking about setting up a savings or investment plan for your children, you may have heard of the Junior ISA which offers an opportunity to help save or invest money for your child’s future.
The ‘JISA’ replaces the Child Trust Fund, which was recently discontinued, (if your child has a CTF, you may still contribute money to it). Any child born after 3rd January, 2011, is eligible for a JISA, which works like the adult ISA: it is held on behalf of children under 18 and available as a ‘Cash’ savings account, or as a ‘Stocks and Shares’ investment account. Please remember that stock market investments provide potential growth but also involve risk, your investments may fall as well as rise and your original investment is not guaranteed. Money within a ‘JISA’ is exempt from income and capital gains tax (tax is deducted from UK share dividends). Tax treatment depends on individual circumstances and tax law may change in the future. When your child reaches 18, they may withdraw the money or let the JISA ‘roll over’ into a full adult ISA. An annual limit of £3,600 per tax year is set on the maximum contribution which can be made to a JISA.
Many companies also offer specific family savings or investment accounts which bring different ways to put money away for the future. From deposit savings accounts, to long term investment plans, you’ll find a variety of products to choose from. Some of these plans involve tax protection in addition to any JISAs or ISAs held. Take the time to learn the details of different plans and accounts – the internet is a great tool for research and you’ll find plenty of organisations and comparison websites to mine for information. You may also want to consider speaking to a financial adviser to make sure you select the right strategy. If you are talking to a professional, there may be a charge for any advice given – an adviser should confirm any cost before meeting with you.
Potential future financial success…
Family saving and investments isn’t just about aiming to build future financial security. While it’s important to prepare for the future, getting your family and your children involved in the process of saving and investing is good financial practice and can be valuable in building your potential for future financial success.
No advice has been provided by Scottish Friendly in relation to these plans. If you are in any doubt as to whether a plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.