Junior ISAs
Stuart Coombe, Paraplanner
After an initial announcement in the April budget the Government has finally announced further details of a new type of Individual Savings Account (ISA) specifically designed for children. Junior ISAs effectively replace Child Trust Funds (CTF) which were phased out at the last budget.
The Junior ISA will be available from 1 November 2011 and it can be fully invested in cash, stocks and shares, or any combination of the two.
Some good news for parents looking to use this allowance is that the maximum annual limit has been set at £3,600, higher than the originally announced ceiling of £3,000. This annual allowance will increase in line with inflation from 6 April 2013 onwards.
Junior ISAs share the same taxation advantages that ordinary ISAs benefit from, with no additional income tax and tax free capital gains. Anyone can contribute to the plan so it can also be used for gifts from Grandparents, friends and family.
The plan will be owned by the child but the money will be “locked in” until the child turns 18, although the child can manage the
Key points 1. Tax efficient saving and investment for children
2. Available from 1 November 2011 3. Investment limit up to £3,600 per annum
4. Cash or stocks and shares
account from age 16. Upon reaching age 18 the ISA automatically becomes an ‘adult’ ISA.
With eligibility for CTFs ending from January 2011, Junior ISAs look set to become a popular option for you to invest for your child’s future, helping to provide a lump sum to cover their university fees, a house deposit or a financial head start they may need in their late teens.
Whilst the Government will not be contributing to Junior ISAs (as they did with CTFs), the more generous annual allowance still makes them an attractive proposition. Of course they will not be suitable in all cases – for example some parents may not want their children to automatically have access to a capital sum at age 18.
To discuss Junior ISAs, or how to plan effectively for your child’s financial future, please contact your Old Mill financial planner or speak to your usual contact to arrange to meet with one of our team.
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