Junior Stocks and Shares ISA
What are they?
Investing for a child is a very important part of being a parent and doing it in the most efficient way is a great idea.
Junior Stocks and Shares ISAs, launched in November 2011, provide a new tax-free way of investing for your child, so that they have a lump sum when they reach adulthood.
Junior ISAs are intended to replace Child Trust Funds; if your child is under 18 and does not already have a Child Trust Fund, they will be eligible for a junior stocks and shares ISA. You can open it on their behalf, then when they turn 16 they will be allowed to manage it themselves. They will gain access to the money in the account when they turn 18.
If your child does have a trust fund then you can still transfer it to a Junior ISA. Just follow your new provider’s procedure, it usually involves filling in a form.
The Types of Junior ISA
The current Junior ISA allowance can either be invested in a Junior Stocks and Shares ISA, a Junior Cash ISA, or divided between the two however you see fit. Only one of each may be held at a time, but transfers are allowed from one to the other, and between providers. Junior Stocks and Shares ISAs are aimed at helping you to build a nest egg for your child, and give them a financial head start when they reach adulthood.
An ISA is a way to invest tax-efficiently. You will be able to invest up to the tax allowance each year for your child. The account can be opened by a parent or guardian and all proceeds are invested on behalf. There are two ISA options available for young people:
Junior Cash ISA
This is a safer option than the Stocks and Shares ISA as your capital is not a risk. However, low interest rates means your savings will have limited growth.
Once the child is 18, the child will be able to access the full amount of money.
Junior Stocks & Shares
These ISAs allow you to invest for your child. As long as the child doesn’t already hold a child trust fund, they can be opened by the child’s parent or guardian with the proceeds being invested on behalf of the child. The funds have to be invested for at least 5 years, so if your child is over 13, a Junior Stocks & Shares ISA might not be suitable.
Once the child reaches 18, the plan can be cashed in or transferred to an adult ISA, but the plan cannot be accessed or cashed in before this time.
In these plans your capital is not protected meaning there can be fluctuations in the capital value of the plan, which can vary dependent on the risk category of the funds invested in. This means that there is a risk that the plan may not be worth as much as has been paid in on maturity.
Some Popular Junior Investment ISAs.
Hargreaves Lansdown Junior ISA
Opening an account online takes less than five minutes, and you can start from just £25 per month or a £100 lump sum
You can view and manage your child’s investments online or using Hargreaves Lansdown's award-winning app, and see all of your family accounts in one place
Friends and family can contribute through regular or one-off payments (up to the current £4,260 limit)
A wealth of expert investment research is available, helping you make the most of this investment in your child’s future
Existing Child Trust Funds can be easily transferred into Hargreaves Lansdown Junior ISAs
Fidelity Stocks and Shares Junior ISA
This account allows you to hold your investments in cash. This means if you're concerned about the market's prospects you can shelter your money in cash, then move it quickly and easily to investments when you believe the markets have more potential
- View and manage the account online, 24 hours a day with our online Account Management service
- Once set up, anyone can contribute to a child’s account at any time, up to the annual limit
- The money is invested and locked away until the child is 18. When the child is 18 it becomes their ISA and they assume full control
- A full range of investments to choose from
Our Family Junior ISA
One Family is a financial services provider based in Brighton, Sussex. It is a mutual society and as such has no shareholders, and is instead owned by its two million members. It is a merger between Engage Mutual and Family Investments.
One Family offer two kinds of Junior Investment ISA:
Ethical Junior ISA – This option will only invest in shares of companies with a responsible outlook on social, ethical and environmental issues. It also mostly invests in UK shares.
Junior ISA – This option is great if you also want to invest overseas and want to invest in other areas aside from stocks and shares, meaning this a slightly lower risk option
Useful to Know
Your child will only be able to access the money at the age of 18 but will then assume full control. If you worry about your child having total access to the money then it could be between to open a savings account in your name, although this would mean losing the tax-free wrapper
- There is an annual management charge per year on these accounts
- You are able to transfer in to this account as long as the amount is £500 or more
- You can also transfer to another provider at any time
- You can’t open a Junior ISA if you already have a Child Trust Fund but you can transfer your child’s Trust Fund in to a Junior ISA
- As these are Investment ISAs, it is possible that you could lose money but as this is a long term investment, the risk is minimal