Halifax launches junior ISA paying 6%
Halifax has launched a junior ISA (JISA) paying 6% - double the rate of what any other JISAs are currently offering.
JISAs were launched back in November 2011 in a bid to offer families a new savings vehicle for kids after the child trust fund was scrapped in January 2011. However, only a few providers have entered the market, and all of those offer rates of 3% or below.
However, the Halifax JISA comes with a catch. In order to get the 6% rate, a person with 'parental responsibility' for the child must first open their own adult ISA with Halifax.
If a parent doesn't open an adult ISA with Halifax then the rate will fall to 3%. It will also drop if the adult ISA is closed.
But given that the bank's five-year fixed-rate ISA tops the best-buy tables with a rate of 4.2%, opening an account in order to boost your child's savings rate won't be a great hardship.
"It's important for children to adopt a positive savings habit at an early age and learning from their parents is the best way to achieve that," says Richard Fearon, head of savings at Halifax. "A junior cash ISA is a really savvy way to plan for the future, and when parents save tax free with us too, we'll boost the rate to recognise the important role family plays in saving."
The JISA can be opened in branch only and, as with all JISAs, no withdrawals are allowed until the child turns 18.
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.