A Junior Individual Savings Account, or JISA, is a long-term, tax-free savings account you can open for a child at any point before he or she turns 18. And, much like normal ISAs, there are two types: the Cash Junior ISA, which is essentially a deposit-based bank or building society account; and a Stocks & Shares Junior ISA, an account in which savings are invested in the stock market, with tax-free dividends
Is my child eligible for a Junior ISA?
The criteria for opening a Junior ISA account is minimal. Your child must be aged under 18 and living in the UK, with an exception being made for the children of Crown servants (i.e. soldiers, diplomats, civil service workers etc) who are dependent on their parents and live abroad. Their parents can still open Junior ISAs despite them not residing in the UK.
If your child already has a Child Trust Fund (CTF), which can no longer be opened as the scheme is coming to an end, you can transfer its contents to a Junior ISA. But you can’t have both at the same time.
How do JISAs work?
Unlike Child Trust Funds, the government won’t contribute money towards your child’s savings in a Junior ISA. However, you will still enjoy tax-free interest or dividends, though.
Each child can have one Stocks & Shares and one Cash Junior ISA at the same time, and in any tax year, you can pay in up to £9,000, spread across both. Anyone can pay in money, not just you – so grandparents and other relatives are welcome to contribute to JISAs.
Until your child is 16, you’ll be responsible for the money in the account. Once your child turns 16, the account will automatically switch into their name. However, there’s no accessing the money in a Junior ISA (this applies to you and your child) until the child turns 18 – so don’t panic, your 16-year-old won’t be able to go on a spending spree with money intended for university fees.
If your child hasn’t had a Junior ISA before and is now 16 or 17, he or she may open an adult Cash ISA for themselves, but won’t be able to open a Stocks & Shares ISA, a Lifetime ISA or any other type. They can have this in addition to their Junior ISA, but once your child turns 18, the Junior ISA will become a full adult ISA and these accounts will need to be merged.
Which Junior ISA should I pick?
In short, as with adult ISAs, it depends on what you want to do with the money saved in the account. A Cash Junior ISA is risk-free; a Stocks & Shares Junior ISA isn’t, but may get better (or worse) returns, depending on your investments’ performance. Whichever type you choose, it’s always worth doing a comparison online to ensure you get the best rates or investment options available – and to keep doing so over the years.
Can you transfer Junior ISAs?
This pretty much depends on the terms of the account you opened as stated when you opened it. Most providers will allow you to transfer funds in a Cash Junior ISA to a Stocks & Shares Junior ISA or vice versa, or to transfer the Junior ISA to another provider if you find a better rate elsewhere. You can transfer most existing JISA’s into Silo too if you’d like, just get in touch via firstname.lastname@example.org and we’ll look into it for you.
Whichever Junior ISA you opt for, it’s well worth taking advantage of the tax-free interest rates on offer to give your child a head-start when it comes to paying for education, housing or anything else they intend to do after they turn 18.
Please note this article is for information purposes only and is not personal advice. As is the nature of investing, your capital is at risk.