New Junior ISA

The weekend financial pages gave reasonable (and in some cases extensive) cover to the increase to the contribution limit for the forthcoming Junior ISA to £3,600.

It has been predicted that if a junior ISA were commenced at birth and the full investment permitted were made each year then at an assumed rate of growth of 5% and the maximum contribution adjusted upwards by 5% pa a fund of around £100,000 could result at age 18.

With the burgeoning costs of higher education all of this is likely to be needed to fund a full time degree course.

The treasury press release announcing the regulations stated the following summary:

Junior ISAs will ensure that all parents have a clear and simple way to save for their child’s future, following the end of Child Trust Fund (CTF) eligibility from January 2011. Junior ISAs will be available from 1 November 2011.

WEALTHFLOW COMMENT:

As we have stated in other blog posts, there are other tax efficient methods for saving for children but which will deliver greater elements of control for the parents and grandparents making the contribution.  Lack of control is the elephant in the room when it comes to accounts owned by children.


Notes:
All UK resident children under the age of 18 who do not have a CTF will be eligible for Junior ISAs.

Any income or gains will be tax-free.

Both cash and stocks and shares Junior ISAs will be available. Children will be able to hold up to one cash and one stocks and shares Junior ISA at a time (two accounts in total).

There will be an overarching contribution limit of £3,600 per year which will be indexed by CPI from 6 April 2013 onwards.

Accounts will be owned by the child and funds will be locked in until the child turns 18.

Children will have the right to manage their accounts from age 16. Junior ISA accounts will by default become adult ISAs on maturity.

Duncan R Glassey
Senior Partner – Wealthflow LLP

duncan.glassey@wealthflow.com

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