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How is interest calculated?
Interest is payable at a rate of 3.00% gross AER.
This doesn’t include any bonus; it is simply the rate payable, although the rate is variable and could change in the future.
Is interest accumulated to my savings?
Yes, because it is a Junior ISA (Individual Savings Account) the interest has to be accumulated to the savings, which cannot be accessed until the child reaches the age of 18.
How long do I have to tie my savings up for?
Savings cannot be accessed until the child reaches the age of 18, at which point the account can be closed or rolled over into an ‘adult’ ISA.
Can I get access to my savings?
No.
How do I manage my account?
The account is managed by post or by visiting a branch of the Skipton Building Society, payments into the Junior ISA can be made by cash, cheque, debit card or bank transfer.
A Junior ISA can be opened on behalf of any child under the age of 16, who is a UK resident and does not already have a Child Trust Fund.
How much can I save?
The maximum which can be saved into a Junior ISA is £3,600 per year.
The Skipton Junior Cash ISA can be opened with as little as £1.
How is the interest taxed?
The Junior Cash ISA is tax free, meaning no tax will be deducted from the interest paid.
What are the advantages of this account?
- No tax is payable on the interest received
- There are currently only two Junior Cash ISAs available, this one from the Skipton Building Society and the Smart Junior ISA from the Nationwide Building Society. Both pay the same rate of interest; however the Junior ISA offered by the Nationwide includes a 0.9% bonus which ends after two years
- The minimum opening balance on the account is low and the interest rate is not tiered, which is an advantage for those people wanting to save relatively small amounts of money
- The Skipton Building Society are members of the UK Financial Services Compensation Scheme
What are the disadvantages?
- Because it is a Junior ISA the savings cannot be accessed until the child is 18, this could be a disadvantage if capital is needed before this date, to meet education costs for example
- There are accounts aimed at children which currently provide a better rate of interest, although depending on how these accounts are funded the interest may be subject to tax
The Investment Sense Verdict
A quick glance at our Junior ISA best buy table will show that banks and building societies have hardly been rushing to offer these types of accounts; in fact only two Junior ISAs are currently available.
Of the two Junior ISAs available we prefer this account from the Skipton Building Society.
The interest rate is competitive, although potentially not as good as other accounts aimed at children, the minimum amount needed to open the account is low, and the interest rate applies to all savers no matter how much is paid into the account.
Furthermore, the Junior ISA from the Nationwide and the account from the Skipton Building Society pay the same rate of interest, but the Nationwide Junior ISA includes a bonus of 0.9% which will be removed after October 2013, making the Nationwide account less competitive in the longer term.
At the moment the Skipton Building Society Junior Cash ISA gets the thumbs up from us, we may of course change our mind as more Junior ISAs are launched in the weeks and months to come, more competitive rates may be offered and of course it will also be possible to transfer from one Junior Cash ISA to another.
Should you wish to discuss Junior ISAs, or alternative ways of saving for your children speak to one of our team of Independent Financial Advisers today. They can be contacted on 0115 933 8433, 0845 078 7774 or by sending an email to info@investmentsense.co.uk.
