5 Things You Need to Know About Junior ISAs

If you're interested in helping your child become financially independent, you may want to consider these new tax-free incentives

Holly Cook 1 November, 2011 | 5:57PM
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After months of announcements and draft regulation statements, junior individual savings accounts--to be known forever more as JISAs--were launched this week. We’re big fans of ISAs at Morningstar: a saving product that enables you to save and invest in a tax-efficient manner certainly gets a thumbs up. And though parents will not be able to transfer existing CTFs into Junior ISAs, or vice versa, a child's parents, aunts and uncles, and grandparents can all contribute to the account. Certainly not all parents will be able to afford to take full advantage of the annual allowance of £3,600, but even a fraction of this total projected amount would go a long way to funding important developments in a child's life such as (ever increasing) university fees.

Below are some of the key characteristics of JISAs that you should be aware of before venturing into these saving products:

Tax-free Saving and Investing
The JISA allows parents, relatives and friends of the family to save cash or shares and funds, free of interest or capital gains, for a child until their 18th birthday, upon which the JISA will be transferred into an adult ISA. Only one JISA can be opened for each child, with an annual limit on contributions of £3,600. The annual allowance will rise in line with inflation from 2013; all interest or income generated is automatically reinvested.

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Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites