Please note that this page is a summary/glossary of the UK’s Junior ISA regulations. You can read the official rules & regulations on the governments website here.Only children born in the UK who don't have a CTF are eligible for the new junior ISA. This covers those who were born before September 2002 and after the 2nd January 2011.
Summary of the Junior ISA Rules & Regulations
November 1st 2011 was the date that the British government launched the new Junior ISA. They estimated that 6 million children would be eligible and another 800,000 every following year. Any child born after January 2nd 2011 is ineligible to receive the CTF, or Child Trust Fund, as the new Junior ISA is its replacement. The key features of this new ISA for Child are as follows.
A junior ISA can be opened on a child's behalf by anyone who has parental responsibility.
Any individual person or organisation can contribute to a child's junior ISA.
Any child who is over the age of 16 can open a junior ISA for themselves, and this is in addition to the adult ISA they can open when they are 16.
There will be no government contributions towards the account unless it is a Junior ISA for a looked after child.
To begin with, £4,000 (tax year 2014/2015) a year can be contributed to the junior ISA but this will be increased every year after April 2013 to keep in line with the rise in inflation measured by the Consumer Price Index.
It will be possible for the holder of a junior ISA to hold both a cash pot and a stocks and shares account simultaneously with a maximum of 2 providers, and the maximum yearly allowance can be split between the two.
It will be possible to transfer funds between the two providers.
All capital gains and income are tax free.
When the child who holds the junior ISA reached 18 it will revert to a standard adult ISA.
Whilst all this sounds to be a pretty good alternative to the CTF there are, invariably, several cons to balance out the pros and these are worth taking into consideration if you are thinking about taking out a junior ISA.
The first one is that any monies in the junior ISA will not be available to help towards school fees as the money can't be accessed until the child turns 18 and the control of the ISA is passed to them.
If you are looking at taking out a junior ISA as a sort of 'Uni fund' the projected figures are that is it is taken out at birth, the maximum contributed every year, with an assumed growth rate of 5%, the payout at 18 would be around £100,000. The chances of this covering a full time degree course in 2030 are slim to say the least, so you may want to think about a plan B to back it up and boost the funds.
The bottom line is that a junior ISA is a credible option for parents who wish to save and invest towards their children’s future. Do your research before opening one to see whether you want to also open the stocks and shares account, as this will give you a wider range of options to choose from. There are more risks with this option obviously, but greater gains to be made, so think carefully about what risks you are prepared to take.