Junior Individual Savings accounts – know the facts

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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.

No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment 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.