JISAs replace the now defunct Child Trust Fund (CTF), with the key difference being that the Government won’t make any contribution to the new accounts. Other characteristics worth noting include:
JISA pros:
- The limit of £3,600 is significantly higher than the £1,200 CTF limit, and the amount is expected to rise in line with CPI.
- There are no capital gains tax or inheritance tax implications with a JISA. Contributions are tax-free for children, donors and parents.
- Unlike with the CTF, multiple people can pay in to the JISA.
- Unlike bare trusts, all income is tax-free.
- The money is locked away until the child is 18, so in an emergency the money is ring-fenced.
- Only the child can access the fund, and there is no control when they get the cash.
- Investors are tied to one provider for cash, and one for stocks and shares.A range of fund houses have announced their intention to provide a Junior ISA, including Witan and JP Morgan Asset Management.
Investment trust body the AIC pointed out that £50 per month into the average investment company over the same time-frame would have grown into £23,645.
The group said: "Investment companies are an ideal way to save for children. With strong long-term performance, the freedom to gear to enhance returns, and a closed-ended structure to help managers take a long-term view of the market, investment companies are an ideal way to access the long-term potential of the stock market."
JISAs will be available to children under 18 and resident in the UK who were born on or after 3 January 2011, or born before September 2002, when eligibility for CTFs started.