ISA Watch: Coventry BS junior cash ISA
Launched in 2011, a junior ISA is the same as the adult ISA in its tax-free saving potential but only available for children. It allows parents, grandparents and family friends to invest in cash and shares on behalf of children under the age of 18.
The Coventry Building Society Junior Cash ISA is paying 3.25%, which puts it at the top of the best-buy table. It has a minimum initial deposit of £1 and for the tax year 2013/14 the maximum you can pay into a junior ISA is £3,720.
Interest is paid yearly on 30 September and when the child reaches the age of 18. All the money saved in the ISA belongs to the child and it cannot be accessed until the child’s 18th birthday.
The account can be opened online, by post, on the phone or in branch, and can be operated in the same ways – except online.Withdrawals cannot be made but further deposits are allowed, as are transfers in from other junior ISAs.
The 3.25% rate is matched by the Nationwide Building Society Smart Junior ISA, but the account includes a 1.15% bonus that expires on 31 January 2015. So the Coventry BS account comes out on top.
For further details about its JISA, visit the website at coventrybuildingsociety.co.uk or call 0845 766 5522.
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.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.