What is a Junior ISA?
Junior ISAs are an initiative by the Government to help parents save for their children's future. Launched in November 2011, junior ISAs offer tax-free savings and investments. Each eligible child is allowed to have one cash ISA and one stocks and share ISA at any time. Transfers are permitted between cash and stocks and shares junior ISAs, or to another junior ISA provider.
Children who were born between 1st September 2002 and 3rd January 2011 will already have a Child Trust Fund, and are therefore not eligible for a junior ISA but you are able to transfer in to a Junior ISA. Talk to your provider for more details or use our comparison tables to find a provider who will except transfers in.
Who is Permitted to open a Junior ISA?
ISAs can be opened by anyone who has parental responsibility for an eligible child. One ISA can be opened per child. Management of the ISA passes to the child when they turn 16. However, funds remain inaccessible until the child turns 18, after which they can either withdraw the funds, or have their account roll over into an adult ISA.
Parents, friends and relatives can pay in to the ISA, these are classed as gifts and cannot subsequently be withdrawn. No withdrawals can be made until the child turns 18 and then responsibility of the account passes fully to them.
What are the Rules Surrounding Junior ISAs?
In terms of rules and regulations, Junior ISAs operate on a similar principle to regular adult ISAs. It's permissible to switch providers, but only one Junior Cash ISA can be held by each child at a time. Unlike Child Trust Funds, junior ISAs don't involve any Government contribution. Each year there is a Junior ISA allowance. This allowance can either be put into a Junior Cash ISA or divided between a Junior stocks and shares ISA and a Junior cash ISA in whatever proportion you wish.
What are the Advantages of Junior ISAs?
- Junior ISAs provide parents, friends and family members with a convenient, tax-efficient way to save for a child's future
- The money saved in a junior ISA stays tax-free once the child reaches the age of 18.
- The money is locked away until the child turns 18, which can stop children from being tempted into spending it on unimportant items.
- If you want to save an annual amount for your child that generates over £100 in yearly interest, a junior ISA ensures that this interest isn't taxed.
What are the Disadvantages of Junior ISAs?
- Once your child reaches 18, the money is theirs to spend or save as they wish. If you've got a specific savings goal in mind for your child - for example, a mortgage deposit - you might be better off setting up a savings account in your own name so that you can ensure the money is used for the purpose you originally intended
- The ISA isn’t always the best option in terms of savings due to dwindling interest rates. Children are also entitled to the Personal Savings Allowance so check if the ISA is the best option for you. Savings Accounts or even Current Accounts could offer better options and higher interest rates
Selected Junior ISAs
Here are a selection of Junior ISAs. For a full range of options and interest rates, check our tables.
Halifax Junior ISA
- High variable interest rate
- Interest paid annually on the 5th April
- Deposits can be made by anyone
- Opening balance of £1
- Transfers permitted
Nationwide Junior ISA Review
- You can manage this account with online banking
- Can be opened online with a minimum of £1
- Can be topped up using a Nationwide Current Account or Instant Access Savings Account
- Transfers in and out are permitted
- High variable rate of interest
- Interest paid annually
This ISA is particularly useful due to the online banking facility. However, if you don’t have a Nationwide account and don’t want to open one then you may have trouble paying money in to the account.