6th October 2020

Everything you want to know about Junior ISAs

We understand that finance can be overwhelming, especially with savings, investments and just generally keeping up with what’s happening with the economy —  it’s a lot to take in, especially if you have just welcomed a new little member to the family. So, here at The Children’s ISA, we stay up to date for you, so you can enjoy the magical moments with your little ones rather than keeping one eye on what’s happening in the world of finance. 

If you are thinking of opening a Junior ISA you’re in good hands, we’re here to make sure the money you have wisely invested gets the best return. Unsure where to start? Let us explain below with our clear, digestible guide to all things Junior ISA

How many Junior ISA options are there?
There are two different types of Junior ISA: The Junior Cash ISA and the Investment Junior ISA.
The Cash Junior ISA works pretty much like a normal savings account (minus the income tax) and the Investment Junior ISA holds specific investments such as fixed interest or stocks and shares for example. If you are thinking of taking the investment route, we offer a wide range and we will personally work with you to find the best option for your needs. Every saver is different, whether you are looking for an actively managed ISA or a low cost option. We also offer an ethical investment and Shariah compliant investment option ISA (which invests in line with the Islamic Investment Guidelines). 

Who can open a Junior ISA?
From September 2011, when the Junior ISA was brought in, any child who is a UK resident and under the age of 18, can hold a Junior ISA Account. We also allow for the Child Trust Fund to be transferred over into a Junior ISA, for those born from September 2002 – January 2011.

Who are the Children’s ISA and how are you different to other Junior ISA providers?
We are an independent company based in Manchester. We believe in offering a simple, no fuss approach to saving towards your child’s future. At the Children’s ISA we have linked up with, and hold strong connections with the largest names in the industry, from Prudential’s actively managed ISA, Shariah ISA’s from Aberdeen Asset Management, Verbatim Asset Management and an ethical option from Eden Tree Investment Management. This is so we can offer you the widest range, to allow for your individual investment needs.

Is a Junior ISA a good idea? 

Think of the Junior ISA as a long term investment into your child’s future. A smart savings option, the Junior ISA account offers tax free saving of up to £9,000 per year. 

Can grandparents open a Junior ISA? 

No, only a child’s parent or legal guardian can open a Junior ISA account. Once this is open, the parent or guardian can share the information allowing family members, friends and, more importantly, grandparents to then contribute to the account.

What is the difference between a Child’s Trust Fund and a Junior ISA?

There are two main differences between the two saving options, firstly Child Trust Funds are not administered online, whereas our Junior ISA is mainly managed online, so you can check in on the savings anywhere, anytime. Secondly, as CTFs were discontinued in 2011, the focus and popularity with financial companies and parents moved to the Junior ISA’s, which subsequently upped most Child Trust Fund’s fees. 

We hope that has helped you feel clearer on Junior ISA’s and The Children’s ISA in general. If you have any questions, please do not hesitate to get in touch!

Do I have to declare my child’s earning from a Junior ISA?
There is no tax payable on interest investment gains in a Junior ISA*. In some cases the Junior ISA accounts can be held up to adulthood, so once your child starts paying tax through their work payslips, any money that is in their Junior ISA will still grow tax-free.

What is the best investment for a grandchild?
Although the child’s parent or legal guardian can only open the account, a Junior ISA is an excellent option for grandparents to contribute to. Once the account is open, family and friends can pay into it. This opens the possibilities for them at a later stage in life and helps provide financial security, which eases the pressure or worry for all of the family.

We recommend saving through a Junior ISA, as a way of building towards your grandchild’s financial future as they approach adulthood. With the total money saved up until their eighteenth birthday a grandparents contribution can help provide the springing board for their ideas, be it a house, further learning or more. We like to view this as not only a financially viable option but investing in a Junior ISA is also environmentally conscious. By avoiding years of plastic toys that get discarded with age, the Junior ISA is a smart option all round. 

How much can a child save tax-free in a Junior ISA?
This depends on the yearly limit set by the UK government. Anyone can pay money into a Junior ISA, but in the 2020 to 2021 tax year the combined total amount paid in the Junior ISA cannot go over £9,000.

However, if you have more money to invest for your child, you are permitted to have one of each Junior ISA savings plans per child (one Cash Junior ISA & one Investment Junior ISA). These don’t have to be with the same provider, so you can research which option is best for your needs. 

What different savings options are there for a Junior ISA?
To give you an overview we’ve summarized our four main options below, there is much more information on each, depending on which option appeals to you the most.

Actively managed: With this Junior ISA there is a fund manager making specific decisions for you, ensuring your investment objectives are met. They keep an eye on the market and overall manage the performance of your investment. We invest in a range of funds and asset classes, diversification across asset classes and investment managers can reduce risk as well as enhance returns.

Low cost: Here, the investment team focuses on reducing costs to boost your returns. This is managed with a screening process,  ensuring that all the investments meet the ‘low cost, safe and suitable’ requirements.

Ethical: With this Junior ISA the money is responsibly invested in socially, ethical companies. The Amity International Fund, for instance, aims to achieve long term growth by investing principally in ethical, international companies.

Shariah fund: A Shariah Investment is an ethical fund, governed by the requirements of Shariah law and the principles of the Muslim religion. This would be most suitable for an investor looking to achieve returns in line with Islamic Investment Guidelines.

We hope that has helped you feel clearer on Junior ISA’s and The Children’s ISA in general. If you have any questions, please do not hesitate to get in touch. 

* There is a small dividend tax on al ISAs that is not reclaimable

© The Children’s ISA Ltd 2024. All rights reserved.

The website and the information contained therein should not be regarded as an offer or solicitation to conduct investment business in any jurisdiction other than the UK. Past performance is not necessarily a guide to future performance and the value of your investment may fall as well as rise, and any income received in the form of dividends may fluctuate. You may not get back the full amount when the account is closed. If paying regular monthly contributions please bear in mind that if contributions are not maintained you will be less likely to achieve the investment amount that was originally projected.

The information on this website is not advice, it is provided solely to enable you to make your own investment decisions. The investments and /or investment services referred to may not be suitable for all investors.

The Children’s ISA Limited is authorised and regulated by the Financial Conduct Authority. (FCA No: 563043)
The Children’s ISA Limited is a company registered in England and Wales. Registered Company Number: 07486015

Registered Office: Unit 2, Digital Park, Pacific Way, Salford Quays, M50 1DR