Junior choice: Saving with Junior ISAs
7th February 2012
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Launched on 1st November 2011, Junior ISAs give parents a way of creating a tax-free savings pot for their children. The Individual Savings Accounts (ISAs) are similar to their grown-up counterparts in that they allow a certain amount of money to be invested each year tax-free.

Junior ISAs – also known as JISAS – are more tax efficient than their predecessor the Child Trust Fund (CTF). This has caused some consternation, as an estimated 5 million children– by definition born between 2002 and 2011 when CTFs were the product of choice – are now excluded from opening a JISA.  An e petition is calling for the two to be merged and the arguments over what is right continues. (Source: Money Observer 7/11/11)

But let’s get back to the point. Whatever happens with the CTF question, JISAS are here to stay. They are the government’s way of promoting saving, particularly with a view to buying a first property or going to University - two expensive events that are becoming increasingly out of the reach of some young people without savings or wealthy parents.

The maximum investment per annum is £3600. No withdrawals can be made until the child is 18 at which time the account becomes theirs to do as they please with. JISAS can be ported to adult ISAS allowing the tax free pot to roll on and grow. JISAS have cash and stocks and shares option and allow a mix of the two. You cannot move fund manager every year as you can with an adult ISA – you have to stick with the same one throughout the tenure of the investment. Pundits argue that this allows for more tactical planning with higher risk investments earlier on and a more defensive strategy as the child nears 18.

JISAS are good for children and good for parents, then. But they also bring potentially welcome news for grandparents wishing to gift money. The current gifting allowance per year is £3000. That’s per person – so it is possible for grandparents to gift up to £6000 per annum exempt from Inheritance Tax (IHT). Amounts over this may also be considered as potential exempt transfers in certain cases (Source: New Model Advisor 7/11/11).

JISAS represent a welcome tax break for parents and grandparents wanting to give their children a financial helping hand. And with tough mortgage lending criteria and increasing university tuition fees always in the headlines, it will certainly take some worry away.

For more information please contact John Davies: jdavies@cliftonnash.co.uk

About the Author

Kevin G

Member since: 13th March 2012

I am a local business owner in Pontypridd and a proud father of two beautiful girls. I recently became a director of thebestof Pontypridd and Rhondda, Bridgend and Cardiff

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