The government has unveiled a replacement for Child Trust Funds which will be called Junior Individual Savings Accounts (JISAs). Below I cut through all the fanfare and give you the key facts.
- JISAs will be available from 1st November 2011.
- A JISA will have an annual contribution limit of £3000 (update 28/6/11 - today the government has confirmed that the limit will in fact be £3,600). It also looks likely that the £3,000 won't be included in estates for inheritance tax (IHT) purposes. If this is the case then JISAs will prove a useful tool to pass money onto children and grandchildren IHT free!
- JISAs can be held in cash or invested in funds and equities with all proceeds tax free.
- It is not clear yet whether the JISA will mirror an ISA and have a higher investment limit for non-cash investments.
- Unlike an ISA no withdrawals will be allowed from a JISA until the child reaches the age of 18. At this point the child will assume full control of the investment.
- They will be no contribution by the Government into a JISA as there was with a Child Trust Fund.
- The Government believes that up to six million British children will be eligible for the scheme and over time 20% of children will have a JISA.
- It was also announced that there are plans to give children in care tax-free savings accounts with cash from the Government.
- A JISA will be managed for the child by a person with parental responsibility for that child.
- Current Child Trust Fund (CTF) holders will not be allowed to apply for a JISA but the CTF investment limit will be increased from the current £1,200 to £3,000.
What do I think of JISAs?
Obviously the government have still to clarify a few points about JISAs but from my point of view any form of tax free saving for children is good news, despite the press claiming JISAs will only benefit the rich. The only obvious downside is the fact that should your darling child turn into the drug taking teenager from hell then there is nothing you can do to stop them from getting their scabby hands on the money. But that was the same with CTFs. In any event, the JISA announcement raises the interesting question of how else you can save/invest for your children's future
How else can you invest or save for your children's future?
The JISA announcement gives a timely opportunity to look at how you can invest and save for your child's future. Fortunately I have produced a guide laying out all your options and the pros and cons of each.
See my article Money tip #79 – How to save and invest for your child’s future.
No need to thank me - just spread the word about Money to the Masses.