Are you looking for a safe way to save money on behalf of your child? Well, a Junior ISA (Individual Savings Account) may be the perfect solution.
Junior ISAs are tax-free savings accounts specifically designed for children under 18. You can choose from cash or stocks and shares Junior ISAs (or JISAs) and when a child turns 18 it becomes their account, which they have access to.
This is a great way for parents or grandparents to save for their child’s future and get the most out of their money.
In this article, we'll break down everything you need to know about Junior ISAs, from how they work and why you might want one, to the pros and cons and some of the options to choose from.
| Provider | Score | Details |
|---|---|---|
| 1. Fidelity | ★★★★★ | Learn more |
| 2. Vanguard | ★★★★★ | Learn more |
| 3. Wealthify | ★★★★★ | Learn more |
| 4. Nutmeg | ★★★★★ | Learn more |
| 5. Barclays | ★★★★★ | Learn more |
| 6. Hargreaves Lansdown | ★★★★★ | Learn more |
What are Junior ISAs?
A Junior ISA allows you to invest in stocks and shares, cash savings, or a combination of the two. You can choose from a range of providers and investments, so you can find the best one for you and your child’s goals.
You can start investing from as little as £10 a month and from when the child is born until their 18th birthday, they can benefit from the tax-free savings. You can put up to £9,000 into one each tax year.
The great thing about a Junior ISA is that it offers more flexibility and you can choose how much you put into one, and what it's invested in. Plus, unlike other saving schemes, the money in the Junior ISA is for your child, not you, so you don’t have to worry about your own taxes increasing or decreasing.
Another great thing about Junior ISAs is that you can transfer your money from one account to another without making any tax payments. This means you can take advantage of different savings options without having to worry about being caught out by the taxman.
On top of all of this, your child can keep their tax-free allowance until they reach age 18. It's then their account for them to do what they like – the money could go towards university fees, for example, or a house deposit, but it will be up to the child to decide.
Who can contribute to a Junior ISA?
Anyone who wants to contribute to a Junior ISA can do so, as long as they are aged 18 or over and the child for whom the account is opened is aged under 18. This could be a parent, grandparent, a guardian or an aunt or uncle.
In addition, contributions cannot exceed the annual subscription limit of £9,000.
Therefore, it’s important to plan ahead and ensure you don't waste additional money by exceeding this limit.
Best Junior ISAs in the UK
First, it's important to consider the type of account you need. If the money is a long-term investment, then a stocks and shares JISA could provide a higher return if the markets perform well. As most JISAs will be opened with a long-time frame, investment accounts tend to be more popular as the returns can be higher than with a cash account.
Next, you'll need to look at the features of the accounts on offer. Many JISAs offer flexible saving options, such as the ability to pay in money and withdraw it as needed. For those looking to save regularly, you should look for a provider that allows automatic payments.
Most providers also offer bonus rewards, such as vouchers and gifts, to encourage saving.
Finally, consider the overall cost of the JISA. Although similar in almost every other way, Cash JISAs generally have significantly lower fees than Stocks & Shares JISAs. Make sure to compare the fees of different providers, as well as any additional costs, such as transferring money in and out.
With so many Junior ISA providers out there, it can be hard to pick which one is best for your child, so we've come up with a comprehensive list of the best Junior ISA providers available.
1. Fidelity
Fidelity is one of the leading providers of Junior ISAs, offering parents a range of tax-efficient investment options with minimal fees.
Fidelity’s ISA offers access to a range of tracker funds, as well as a portfolio tailored to each individual investor’s objectives.
2. Vanguard
Vanguard offers parents a self-directed Junior ISA with very low fees.
With its easy to use online platform, Vanguard’s Junior ISA allows investors to select investments of their own choosing, giving them complete control over their asset allocations.
3. Wealthify
Wealthify is an online investment service that is ideal for parents who lack the knowledge and confidence to set up and manage their own portfolios.
Wealthify's Junior ISA offers an automated approach, enabling parents to invest for their children with minimal effort.
4. Nutmeg
Nutmeg‘s Junior ISA is an easy-to-use platform that provides parents with access to a range of low-cost tracker funds, as well as access to socially responsible investments.
The platform also offers a range of tax planning tools to help parents make the most of their investments.
5. Barclays
Barclays Junior ISA offers parents a range of low-cost funds and the ability to save for their children's future in a tax-efficient way.
Barclays also offers a range of online tools and resources to help parents make efficient investments.
6. Hargreaves Lansdown
Hargreaves Lansdown offers a wide range of Junior ISA options, including tracker funds and actively managed funds.
Its online platform is easy-to-use and allows parents to access detailed research and advice.
These are just a few of the best Junior ISA providers available, so make sure you compare the options and find the right one for your family
What happens when a child turns 18?
When a child reaches their 18th birthday, any Junior ISA will automatically be transferred over to an adult ISA in their name. While this may seem like a relatively straightforward process, there are a few key things to consider in order to make sure that the transition is as smooth as possible.
When a Junior ISA account is transferred over to an Adult cash ISA, it is important to remember that the funds are still being held on behalf of the child. Therefore, the money remains in the child’s name, and they will still be the only one who can access the funds until they turn 18.
Although the funds are still in the child’s name, once they reach 18 they are allowed to make decisions regarding their money, and so it is important to talk to them about their plans and what they would like to do with it to inform them about all the different options available.
Being aware of what is available can help to ensure that their savings are used in the most beneficial way possible, and also ensure that their hard-earned money can be used as effectively as possible when they reach adulthood.
Junior cash ISAs or Junior stocks and shares ISA?
A stocks and shares JISA could provide higher returns however a cash ISA may be your preferred option if you want a safe place to put your cash. If you are going for a cash option however, it's worth checking the interest rates avaialble when compared to other savings accounts on the market.
What is the minimum amount that can be paid into a Junior ISA?
The answer to this question depends on the type of Junior ISA and which provider that you go with. Cash ISAs usually have the lowest minimum payment, typically ranging from £1 to £25, although some accounts may require only a minimum payment of £10.
The minimum payment for stocks and shares ISAs can be higher, typically ranging from £100 to £500. These accounts usually require a larger upfront payment in order to open the account, but this is usually offset by the higher potential returns that you can receive.
What are the fees?
In addition to the principles of the minimum payment required, you should also consider the ongoing costs associated with managing a Junior ISA. Many providers charge a variety of fees, including initial setup fees, annual management fees, transaction fees, and more.
It’s important to read through the small print and make sure that the account is right for your child, and their financial circumstances, before signing up.
Will the government contribute to my child's ISA?
With the cost of living in the UK ever increasing, it is important to start planning ahead for the financial security of our families. But will the government contribute to your child’s Junior ISA? In short, no.
The Junior ISAs, available to those under 18, are a great way to save for your child’s future.
Parents, guardians, or those with parental responsibility are able to open the account in their child’s name with different providers.
The money saved in the account will not be subject to income tax or capital gains tax, nor is there a tax charge on the interest or returns.
However, the government does not directly contribute to the Junior ISA but does offer tax benefits to encourage people to save for their child’s future.
Can a child have more than one Junior ISA?
Unlike adult ISAs, each child can only have one type of Junior ISA at any one time. This means that a child cannot have both a Cash Junior ISA and a Stocks and Shares Junior ISA, for example. In the past, you could also have child trust funds, but these have since been discontinued.
It is important to point out, however, that the limit of one Junior ISA does not have to be a Cash Junior ISA, if parents wish to invest in stocks and shares for their child, they can still do so — as long as it is done within the confines of the single allowed Junior ISA type.
This means that the Junior ISA could be invested in a single specific stocks and shares fund or a combination of funds and cash.
From a practical point of view, this makes it simpler for parents to monitor and manage the money their child has in savings compared to a child trust fund. As there is only one Junior ISA, they can easily ensure that their child’s money is being invested and managed in the most suitable way.
What happens if the allowance is exceeded?
Firstly, any excess money that you pay into the account will be considered to be a taxable gift by HMRC and this may lead to an immediate liability for tax. This means that you (or the parent) will need to make a return to HMRC, declaring the excess payment and potentially paying any associated tax due on it.
This can be a surprisingly large figure and it's best to make sure that you don't exceed the allowance in the first place.
Secondly, any excess that has been paid into the account must be withdrawn. It is important to take this step as soon as possible in order to minimise any other potential penalties. Some providers may charge an administrative fee for withdrawals that exceed the allowance, while others may charge an interest penalty or close the account completely.
This will vary between providers so it's important to make sure that you check the small print beforehand.
Finally, you will need to make sure that you don't exceed the allowance in the future. This can be particularly difficult if your account is operated by a provider who doesn't provide a real-time account balance.
In this case, it's important to keep track of your payments and to make sure that you stop making payments when the allowance has been reached.
Are funds safe in Junior ISA accounts?
Funds in a Junior cash ISA are safe and secure, and your money is held untouched in a bank account in the child’s name until they reach the age of 18. The money is also protected from outside claims of creditors, so you don’t have to worry about your funds being seized.
However, if you've chosen a stocks and shares JISA, you'll need to be aware that returns are not guaranteed as you will be investing the money you put in.
In order to make sure the funds in your Junior ISA are safe, you should make sure to select a reputable banking provider which is covered by the Financial Services Compensation Scheme (FSCS). As with any other financial product, you should also be aware of any fees and charges that may be applied to the account.
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