Junior Individual Savings Accounts (JISAs) are launched on 1st November 2011, and allow children to benefit (on reaching majority) from a contribution of up to £3,000 a year.
Junior ISAs were announced shortly after the abolition of the Child Trust Fund (CTF) from 1st January. As a firm we are regularly involved in helping our clients who tend to be at or in retirement plan multi-generationally, and they often wish to provide for their grandchildren. Whilst I am broadly positive over another legitimate form of savings it is concerning that the rules allow an 18 year-old to draw what around £100,000 (not guaranteed, of course, and assuming maximum contributions for 18 years). It is therefore our view that most of our clients should still consider more conventional forms of provision, for example Discretionary Trusts, of which grandchildren could be beneficiaries, and parents or grandparents Trustees.
For those who do wish to invest in JISAs, both cash and investment options are available. Given the long-term nature of this form of investment it is likely that some sort of non-cash investment would be appropriate, but this places some or all of the invested capital at risk.
Stakeholder pensions are still an appealing savings vehicle, offering 20% tax relief up to a maximum net contribution of £2,880 (£3,600 gross), some may see the inaccessibility as a disadvantage but others as an appealing benefit.
Overall, what appears a simple addition to the broad range of investment options, should be viewed as part of an overall holistic financial plan; and professional financial planning advice should be sought.
