The Junior ISA (JISA) has rarely been out of the news since its launch at the tail end of last Autumn, with many debating its merit as a vehicle for saving for our chidren’s futures and whether it adequately fills the gap left by the late
Child Trust Fund. However, for any parent who’s considering opening one for their child it is worth getting to grips with the basic facts before weighing up their options and, to that end, the following provides an at-a-glance view of all the most pertinent information about JISAs.
Who is Eligible for a JISA?
- UK resident children (i.e., younger than 18) born...
- since 1 January 2011
- before 1 September 2002
Children born in the period between the dates above are instead eligible for a Child Trust Fund (CTF), the relatively short-lived precursor to the current Junior ISA, into which the government would contribute a starter fund, typically £250. Unfortunately those who are eligible for CTF cannot have their CTF switched into a Junior ISA.
Who Can Open a JISA?
- Parent/Guardian
- in the name of their child
The parent or guardian who opens the account becomes the registered contact for that account however any monies put into the ISA will always be owned by the child as soon as they are credited to the account, and not the registered contact. The registered contact cannot easily be changed once they have opened the account unless there is a suitable reason, such as the guardianship of the child changing (new foster or adoption parents for example), although the child can become the registered contact themselves when they turn 16.
What Accounts Can Be Opened?
- One Cash ISA
- One Stocks & Shares ISA
A child can hold both elements at the same time (as is the case with an adult ISA) and these can be held with different providers, but they are only entitled to have one of each account type open at any given time. At 16, the ‘child’ can also open an adult ISA themselves which will be completely ring-fenced from the Junior ISA.
How Much Can Be Put In?
This is the limit for the 2012/13 tax year and is likely to rise in future tax years as the subscription limit for adult ISAs does. The entire sum can be put into either the Cash or Stocks and Shares elements, or split in any proportions between them.
What are the Investment Options?
The monies within a Junior ISA can be apportioned however you wish amongst these options but, as with an adult ISA, the cash elements must be held within a Cash ISA (unless the cash is awaiting investment within the Stocks & Shares ISA) and the other investments, including Shares and Collectives, must be held within a Stocks and Shares ISA. For a full breakdown of all the investment options you should refer to a financial adviser and/or check the various providers on the market, however the investment opportunities will vary from one provider to another.
What Tax Breaks are Available?
The Junior ISA protects any income on cash savings and investments, including interest and dividends, that would usually be susceptible to tax where the child’s overall income exceeds the standard annual tax free allowance that all individuals benefit from (£8,105 for 2012/13). In addition any gains the ISA makes will not be affected by CGT.
When Can the Monies be Accessed?
- When the child turns 18
- If the child is terminally ill
- If the child has died
Although the child can take over control of the Junior ISA as the registered contact when they turn 16, they will still not be able to withdraw the money until their 18th birthday. If the child is terminally ill the registered contact may apply to the
HMRC to withdraw the monies and if the child has died the monies will pass within their estate to the relevant beneficiaries.
© Stuart Mitchell 2012
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