Do you have savings for your children? Mojomums know how hard it is to put regular savings away for your children’s future and according to research by the UK’s leading financial website for women, SavvyWoman.co.uk, almost half of parents (49%) wrongly assume all children can have a junior ISA and 44% either think there are no limits on how much can be paid into one each year or aren’t sure if there are any limits.
On November 1st it’s three years since the launch of junior ISAs as a tax-free savings or investment account designed to replace Child Trust Funds, but the signs are that many parents are baffled by the rules and their children could be missing out as a result.
432,000 junior ISA accounts were subscribed to in the latest financial year (2013-14) amounting to £578 million, with three quarters in cash. Junior ISAs work in a similar way to adult NISAs in that interest on cash is paid tax-free and there’s no tax to pay on stocks and shares junior ISAs when cashed in. At the moment, junior ISAs can be transferred between providers to get a better return, however money cannot be withdrawn from junior ISAs until the child is 18 and children can’t take out a new one every year.
If you are able to save even the smallest amount of money, be it with weekly or monthly savings or just by putting a little birthday or Christmas money away for your child, Mojomums think the following guide to Junior ISA’s is very handy:
SavvyWoman’s Guide to Junior ISA Basics:
- A junior ISA has to be opened by a parent or guardian on behalf of their child but once the child reaches 16 they can decide where their junior ISA money is saved or invested.
- Parents or guardians, family and friends can pay into a junior ISA every year, up to an overall limit. The junior ISA limit is £4,000 in the tax year 2014/15 but it changes every year.
- Children can have one cash and one stocks and shares junior ISA.
- Money cannot be withdrawn before the child is 18 when the junior ISA matures and it is theirs to manage. It’s automatically rolled over into an adult NISA unless the child withdraws the money.
- Children cannot have a junior ISA if they already have a child trust fund and currently a child trust fund can’t be transferred into a junior ISA, although this is due to change in April 2015.
- Not all accounts accept money transferred from another junior ISA.
For more information visit www.savvywoman.co.uk
Children cannot have a Junior ISA if they already have or qualify for a Child Trust Fund. CTF’s were introduced in 2002 and abolished in 2011, the same year Junior ISAs were launched. Over six million children are still locked into CTF’s however they can keep paying into them and also switch to another CTF provider at any time. Like a Junior ISA, money is locked away until the child’s 18th birthday. Since 1 July 2014, children aged 16-18 can also hold a cash NISA (but cannot open a stocks and shares NISA) as well as a junior ISA. They can pay up to £15,000 into their NISA for the tax year 2014-15 in addition to any amounts they pay into their junior ISA.
Junior ISAs were launched on 1 November 2011.
Cash and stocks and shares junior ISA subscriptions are combined due to statistical disclosure rules: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/348071/Full_Statistics_Release_August_2014.pdf.
From July 1 2014 the government changed adult ISAs to NISAs (New ISAs). This applied to all existing ISAs and new accounts opened after 1 July. The Government changed the name to reflect the increased limits and flexibility available to account holders: http://www.hmrc.gov.uk/isa/new-isa-faq.pdf.
Top four Junior ISA rates as of October 2014: Nationwide BS @ 3.25% AER / Coventry BS @ 3.25% AER/ Mansfield BS @ 3.05%. AER / Halifax 3.0% AER (Halifax pays 4% if the ‘registered adult’ has an adult cash isa).
In April 2015, the government is allowing savings kept in a CTF to be transferred to a Junior ISA: https://www.gov.uk/government/news/government-to-allow-child-trust-funds-to-transfer-to-junior-isas.