Junior ISAs no use to the majority

Junior ISAs (JISAs) will be of little benefit to ordinary people according to leading financial advisers, who believe the new schemes will appeal only to the rich.

Parents can invest up to £3,600 a year in the new accounts, which offer the same tax benefits as a normal ISA, but cannot access the money themselves – it belongs to the child who can take control of the account at 18 – no matter what they might need the money for.

Chris Spear, managing director of IFA group Spear Financial, thinks this will deter all but the few who can afford to give what could be a very large sum of money away to their children with no strings attached.

"Like Child Trust Funds before them, these products are suited to wealthier people because of the limitations." he said, "My son plays the cello. If I want to buy him a new cello, how do I access the money I’ve put aside for purchases like this, which are for the benefit and development of the child? I can’t."

Kerry Nelson, managing director at IFA group Nexus, agrees. She said: "Anything that encourages long-term savings is positive, but like most things these days only some people will benefit, and these products aren’t going to help the masses – for whom purse strings are tight."

Tim Cockerill, head of investment at Rowan Dartington, said: "On the one hand I think the principle is great because it’s about the long-term and if you can put money away for your children when they are young you can do very well for them."

"Most parents, though, would have a problem with the money becoming the child’s at 18. Are 18 year olds responsible enough financially if they suddenly find themselves in possession of large sums of money?"

He continued: "It is not fair to say all of them aren’t, some might be, but there is a great concern that many would not have the experience and discipline to handle the money, and it would be a great shame to see a significant nest egg frittered away in one way or another."

All three believe there are more attractive options for parents who want to save for their children, but don’t want to simply hand over a huge lump sum as a birthday present.

Chris Spear said: "There are plenty of alternatives, savings plans like those from M&G or Invesco costing £20 to £30 a month for example, which offer a means to save for your children with much greater flexibility, and I would rather use one of these."

"You can also buy off-the-peg trusts from a lot of insurers. They are limited in that you are stuck with one insurer, but if it’s someone like Aviva – for example – offering a low-cost contract and a decent investment, you don’t need to worry about them."

Nelson added: "If you want to do something similar but don’t want to be tied up for 18 years, I’d put the money into an OEIC via an ISA, where you can save ad hoc, and you’ve got flexibility. You can take chunks out of an ISA when you need them, and draw an income, that’s why ISAs lend themselves to so many different things, I really don’t think you need to look at anything else until you’ve maxed your ISA out – it’s the most tax efficient thing you can possibly consider."

Tim Cockerill added: "If I were looking for something appropriate for a young person I’d choose something in the emerging markets arena, because I think that’s where the long-term growth is, and by investing on a regular savings basis you’ve got the benefits of affordability and pound-cost averaging."