Final Junior ISA details revealed
Junior ISAs will be available from 1 November 2011 with a £3,600 limit.
The Treasury has today confirmed the increased savings limit from £3,000 to £3,600 and that its guideline date for introducing Junior ISAs will be upheld. Junior ISAs - or JISAs, as they are already being referred to, are being introduced to bridge the gap left after child trust funds were abolished.
They are available to children born on or after 3 January 2011, any child under 18 years old born before September 2002, or anyone born between these dates who doesn't already have a child trust fund. Those with existing child trust funds aren't eligible for a JISA.
Children will be able to hold both a stocks and shares ISA and cash ISA; however unlike adult ISAs it's not possible to hold ISAs with multiple providers although, provided transfers are allowed, account holders can switch providers each year.
Children won't be able to access their savings until they reach 18. Alternatively, if they don't withdraw the money, the JISA will revert to a standard adult ISA.
Banks, building societies and investment houses are now expected to reveal details of their own JISA products and specific terms and conditions. A number have already released details following the Treasury's announcement.
Familes and the financial sector alike are welcoming the introduction of products that will get families saving.
Ian Sayers, director general of the Association of Investment Companies, says investing the maximum £3,600 into a stocks and shares ISA through an investment company would have grown to £147,541 over 18 years.
He adds: "Junior ISAs offer a straightforward way to save for children tax efficiently. The use of the well-established ISA brand should help build confidence and familiarity with the product.
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.