Focus on the Investment Junior ISA (JISA)
Posted on June 5, 2017
Following the demise of the Child Trust Fund (CTF) the government introduced Junior ISAs as a replacement to encourage parents to start saving for their children’s future. One major difference between the two is that there are no government contributions for the JISA, so it’s down to friends and family to contribute. They do however, have the same subscription limits and with both accounts the child gets their hands on the money at age 18.
There are 2 types of Junior ISA, cash or stocks and shares. The current limit for this tax-free investment is £4,128 (for the tax year 2017/18).
Things to bear in mind when choosing a JISA:-
- A JISA must be opened by the child’s parent or guardian however, once opened anyone can contribute.
- A child can have one cash JISA and one stocks & shares JISA at the same time
- The maximum allowance is set by the government.
- This is the child’s policy and they can control the policy from age 16 and will have access to the funds at age 18.
- If the child doesn’t take the funds at 18 then the policy will “roll-over” into an Adult ISA
- With most providers this tends to be a more flexible policy, whereby premiums can be adjusted and top up payments can be made e.g. Birthday or Christmas monies could be invested
- Start from as little as £10 per month or £100 single (other providers may differ)
There are of course many variants of cash and stocks & shares JISAs and many different product providers to choose from. Stocks and shares JISAs should not be ruled out as there are some good performers out there. Sheffield Mutual’s Junior ISA is a stocks and shares JISA which aims to offer a low to medium risk investment. Our JISA is a part of a with-profits fund and not directly exposed to the stock market, monies invested before the child’s 13th birthday are guaranteed on maturity – the point here is… make sure you do your homework –
- Check how “risky” your investment could be
- Check past performance
- Are there any member benefits?
- Are there any guarantees?
- Also check out the provider’s website and look for testimonials or reviews from their existing clients to see how they have found the service.
Child Trust Funds (CTFs) can now be transferred into JISAs which gives parents much more choice as to where to keep their child’s money and how much risk they are willing to take. This is especially worth noting, as the government has now removed the requirement for ‘Lifestyling’ on the CTFs. ‘Lifestyling’ was initially due to come into force at the child’s 13th (then 15th) birthday, this involved moving the monies into a lower risk investment type to protect the funds as the child was nearing the policy maturity date at age 18. Providers don’t now have to offer this facility so the level of risk remains the same throughout the policy life. Parents do however have the option to move to a cash CTF or transfer to a cash JISA which carry no risk but potentially very poor returns in comparison to other products.
If you have any questions one of our trained staff will be happy to help, you can visit our main website for online chat or call us on 01226 74100 during office hours (Mon-Fri 9am – 5pm) or, if you are local, you are welcome to book an appointment here at our offices in Tankersley, Barnsley.
This blog provides generic information and opinions of the writer and should not be relied upon for making investment decisions. No advice has been provided by Sheffield Mutual. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should consider contacting 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 or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand. Any reference to taxation is based on the writer’s understanding of current tax legislation and practice, which could change in the future.