The complete guide to Junior ISAs

How do they work?

Like regular ISAs, there are cash and investment JISAs to choose between. Your child can hold both types in the same tax year, splitting the £3,600 annual limit between them however they choose. They can only have one of each with a single provider at any time, however, meaning if you wanted to change provider you would have to move all of your JISA investments or savings to it.

Who is eligible?

At the moment, children that already have a CTF will not be able to also open a JISA - something that has provoked criticism from parents and the financial industry alike. An online petition has been launched asking that existing CTF account holders should be able to merge their CTFs into JISAs, so they can benefit from the better interest rates on offer.

For now, children are only eligible to open a JISA if they were born before the introduction of CTFs in September 2002 and they are under the age of 18, if they were born after the closure of new CTFs on 3 January 2011 or if they haven’t opened a CTF.

Can the child access their savings?

Unlike adult ISAs, once money is put into a JISA it cannot be accessed until the child turns 18. If the money isn’t touched, any savings will automatically transfer over into an adult ISA, which can be accessed as and when the account-holder decides.

Parents of the ISA holder can make contributions – which, of course, is the purpose for having opened the account in the first place – but this doesn’t give them any right to access the money or stop their child spending it as they please on reaching the age of 18.

Finally, while they can’t access the money until then, children can also manage their own JISAs from the age of 16.

What are the advantages?

JISAs pay interest tax-free, as do their adult counterparts, and neither will you have to pay any capital gains tax when you sell shares within a stocks and shares JISA.

Saving regularly for a child will build up a signifi cant pot by the time they reach 18. Investing the maximum £3,600 into a stocks and shares ISA through an investment company would grow to £147,541 over 18 years, according to the Association of Investment Companies.

Will the JISA take off?

Despite the well-publicised launch last November, the buzz around JISAs has been somewhat muted. When they were introduced, a survey from the Association of Investment Companies revealed that 74% of respondents still did not know what a JISA was. And of those that did, only 32% said they were likely to open one.

With ISA activity always at its busiest during the spring (before the current tax year ends on 5 April) all eyes will be on the JISA market to see if it can garner more of a following.Even if you can’t pay in the full allowance, you still stand to make a significant amount. If you paid £93 a month (£1,117 a year) into a stocks and shares JISA, JPMorgan calculates you would accrue a pot worth more than £34,000 after 18 years, based on 5% annual return.