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Growing without the pains

  • By Malcolm Anderson
  • Published 01/30/2012

Save for their future with our new Junior ISA

A Junior ISA is the new, tax-efficient way to save for your child’s or grandchild’s future. Up to £3,600 can be invested each year tax year; from April 2013, it will rise in line with inflation (RPI). Like adult ISAs, the return achieved will be free from income and capital gains tax and the money becomes available to the child on their 18th birthday.

“A Junior ISA will potentially be open for up to 18 years and so it should have plenty of time to grow if it’s taken out in a child’s early years.”

We calculate that a Junior ISA could be worth nearly £108,000* if you invest £300 a month from the birth of a child until the time they reach the age of 18.

*This projection is for illustrative purposes and assumes a growth rate of 6%, after charges and is not guaranteed. This could help them through university, for example, or be a big step towards raising the money for their first home. Please be aware that the value of investments in a Junior ISA can go down as well as up and your child may get back less than you invest.

The Fidelity Junior ISA provides you with huge choice. You can select from any of the funds in our fund supermarket, FundsNetwork&™, which offers over 1,200 funds from more than 70 fund providers. You can choose more than one fund for the ISA and include options from more than one provider.

Fund ideas for your Junior ISA

A Junior ISA will potentially be open for up to 18 years and so it should have plenty of time to grow if it’s taken out in a child’s early years. Historically, shares have tended to perform better than bonds, cash and property over the long term and so this is one consideration. If you are comfortable investing in the stock market, an equity fund might be a good option.

Alternatively, you may feel that holding a mix of assets is a good approach and so a multi-asset fund could be what you are looking for. Lower-risk options include bond and cash funds. Charges can also make a big difference to returns over the long-term and so funds with no or low initial charges and competitive annual management charges could also be worth considering.

Junior ISAs – at a glance

. The Junior ISA must be set up by a parent or guardian

. You can have a Stocks and Shares ISA or a Cash ISA (or a combination of both)

. The investment limit is £3,600 for 2011/12

. They are available to each child in the family each tax year

. Anyone can contribute to a child’s account at anytime through the year

. The money is locked away until the child reaches the age of 18

. The child is the beneficial owner of the Junior ISA Junior ISAs are available

. to children who are resident in the UK and were born:

. On or after 3 January 2011

. Before September 2002 and who are under the age of 18

. Between these dates as long as they do not already have a Child Trust Fund

Remember, the eligibility to invest in a Junior ISA will depend on your individual circumstances, and all tax rules may change in the future.

About the Author: Malcolm Anderson: independent journalist writing about the junior ISA.

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