The new Junior ISA has been launched; we thought we would take a look at this new savings product aimed at children and answer your questions about how it works.
What is a Junior ISA?
A Junior ISA is a tax efficient savings wrapper aimed at encouraging savings for children.
Parents, grandparents, guardians and friends will be able to pay in to a Junior ISA on behalf of children.
As with the adult version the money can be held in Cash or invested in funds.
When will the Junior ISA be available?
Banks, building societies and investment providers will be able to offer the Junior ISA from 1st November.
The early signs are that many of the likely providers of Junior ISAs may take some time to launch their products as they develop their offerings and monitor the offerings launched by their competitors.
For Junior Cash ISAs you can see which banks and building societies are offering the new product by viewing our Junior ISA best buy table.
Who can hold one?
Any child under the age of 18, who is a UK resident, and who does not already have a Child Trust Fund can have a Junior ISA.
Children over the age of 16 can open the account themselves, under 16’s need a parent or guardian to open it for them.
How much can be paid in?
The maximum contribution per tax year will be £3,600.
If the maximum contribution is not made in a tax year it cannot be rolled forward to future years.
Do the government pay anything in?
No, unlike the Child Trust Fund the government will make no contribution to Junior ISAs.
What can a Junior ISA invest in?
In this respect it works in very much the same way as the adult version.
Junior Cash ISAs will be offered by banks and building societies and will work in a similar way to other savings accounts, however any interest credited to the account will not be taxable.
For those people who want to take more risk, Junior ISAs will also be allowed to invest in funds. In the same way that you can with the adult version funds will be available for people wanting to invest in shares, gilts, corporate bonds, plus other types of assets.
Each child can hold a Junior Cash ISA and a Junior Investment ISA. However, unlike the adult version, children will not be able to hold more than one Junior ISA of each type with different providers.
Savings can be transferred from a Junior Cash ISA to a Junior Investment ISA and vice versa, it will also be possible to transfer Junior ISAs between providers.
Can any withdrawals be made?
No, not until the child reaches the age of 18.
When they are 18 children can either take the money out or roll the savings over into an ‘adult’ ISA.
Who is offering the Junior ISA?
The number of banks and building societies offering the new Junior ISA are limited at the moment. You can see who is offering the most competitive rates of interest by looking at our Junior ISA best buy table.
Can a Child Trust Fund be moved into a Junior ISA?
No, the government has announced that this will not be possible, although to bring the Child Trust Fund in line with the Junior ISA it has announced that the maximum contribution allowed into a Child Trust Fund will be increased to £3,600.