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Junior ISAs set to be a family affair

Junior ISAs set to be a family affair

Category: Savings

Updated: 28/10/2011
First Published: 28/10/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Junior ISAs are set to prove the popular savings choice amongst all members of the family after parents, grandparents and even family friends claimed they will be lining up to contribute to the new accounts.

Being launched next week, well over a third (36%) of parents told JP Morgan Asset Management they would take out a Junior ISA for their child.

However, a further 43% of people said they would contribute to a Junior ISA if one was opened by a relative or close friend, with grandparents being first in line to make payments.

As of next Tuesday, the parents of anyone born on or after 3 January 2011 will be able to open a Junior ISA for their child, as will those who have a child under age 18 who does not have a child trust fund.

Parents, grandparents, other family members and friends are all allowed to make payments to the account (as are the children themselves!) up to a maximum of £3,600 per year.

As with the adult version of the ISA, it is possible to invest the money in stocks and shares, cash or a combination of the two.

Any money that goes into the Junior ISA has to be left untouched until the child reaches 18, although parents might be wise to note it is only the child who can access the money.

As to how much is actually expected to be paid into the accounts, the survey revealed that the average overall contribution will be £1,117 per annum, or £93 per month.

"It is encouraging to see that it is not just parents who would consider contributing to a Junior ISA, and that it is the wider network of family and friends and in particular grandparents who also realise the importance of saving for a child's future in a tax efficient way," said David Barron, head of investment trusts at JP Morgan Asset Management.

"Our calculations show that 18 years of investing the average contribution pot of £1,117 every year (£93 per month), assuming a 5% return per annum, would mean a savings pot worth over £34,000 by the time the child turns 18."

"It has never been more important for parents to start planning towards their child's future. With increasing costs, such as the rise in tuition fees at university, planning ahead and building a savings pot will go a long way to giving a child a positive step into adulthood."

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