Junior ISAs
The Junior ISA, which will replace Child Trust Funds (CTFs) which were withdrawn to new investors last year, will become available from the 1st November 2011. Junior ISAs will extend to under 18s the same tax benefits which parents (and all adults) already enjoy.
Contributions of up to £3,600 a year can be made to cash, stocks and shares, or a mix of the two. Benefits will not be available until the child reaches age 18. Anyone under 18 born before September 2002 or after January 2011 (ie: those who do not have a CTF) will be eligible for a Junior ISA (and for those with CTFs, the annual limits are expected to be brought in line).
The Junior ISA could provide a significant step up for children whose family and friends get together for their benefit. Final values will always be subject to the underlying fund(s) in which the monies are invested. However, as an idea of what 18 years of saving might offer, assuming an average of 5% pa (net of charges), that £3,600 pa could leave the lucky beneficiaries with a contribution of over £100,000 towards their world trip, first house or hotly debated tuition fees.
Of course Junior ISAs are just one way of saving for children and other options are available which can retain greater control in the hands of parents / grandparents if you don’t like the idea of 18 year olds being able to do what they will with the capital you have worked hard to build for them! We would be happy to discuss the options with you to assess the most appropriate strategy.