They were supposed to encourage children and their parents to save but an investigation by the Independent on Sunday has revealed a startling lack of support from the UK’s banks and building societies for the new Junior ISA.
The Junior Individual Savings Account (ISA) will be introduced on 1st November and will allow children and parents to save up to £3,600 per year in each ISA. The new Junior ISA will have the same tax advantages as existing ISAs and also be able to hold both Cash and Equity investments.
For new savers the Junior ISA is designed to replace Child Trust Funds and the annual £3,600 allowance is significantly higher than the amount which can be paid into a CTF, which is limited to £1,200 per year.
However, despite the new Junior ISA being a flagship announcement by George Osborne it would seem that the response from banks and building societies as well as investment houses, which could provide equity based Junior ISAs, has been lukewarm to say the least.
One senior source who spoke to the Independent on Sunday said that banks and building societies were adopting a “wait and see” approach, which could leave choice limited when the Junior ISA launches on 1st November.
High street names
It is clear from the investigation that many of the major UK banks will not have a Junior ISA available when they are launched.
HSBC said they were “extremely interested” in offering a Junior ISA but “doesn’t have a date for launch”.
The UK’s largest savings provider, Lloyds, said it was “still working through the detail” making it unlikely that they will be ready for the launch date of 1st November.
Barclays are taking a similar approach.
The only big name on the high street seemingly ready for the 1st November is the Nationwide Building Society but even then only the Cash version of the Junior ISA will be offered.
The story is the same with the major investment houses, with only a handful of providers offering the Equity portion of the Junior ISA directly from them. It seems that the investment houses will prefer to pick up assets to manage via the major platforms rather than marketing the Junior ISA directly to the public.
Experts have been amazed by the slow reaction of the major banks and building societies, pointing out that administration of the new accounts should be relatively simple as the structure is so similar to existing ISAs.
Fidelity Investments are one provider who will be ready for the 1st November launch, their investment director, Tom Stevenson, said: “We wanted to be able to offer the advantages of a Junior ISA, no matter what age, straight away. It is hard to understand why anyone would not turn to a Junior ISA as the first place to save or invest for a child because there are many tax efficiencies and administrative advantages for those making contributions for a child.”
He continued: “Unlike with an adult ISA, a Junior ISA has to be with one provider at any given time, although it can be switched between providers if you wish. This means that if you invest with a platform you can allocate the allowance among a variety of fund providers each year, rather than being able to invest with only one provider.”