Almost half of parents are baffled about Junior ISAs (JISAs) nearly three years on from their introduction.
Some 49% wrongly assume all children can have a JISA and 44% either think there are no limits on how much can be paid into one each year or aren’t sure, according to new research from SavvyWoman.co.uk.
Put simply, a JISA is a long-term savings or investment account with tax advantages. They were introduced on 1 November 2011, and are available for children under 18 who were not eligible for a Child Trust Fund (eligible children born between 1 September 2002 and 2 January 2011).
Sarah Pennells, founder of SavvyWoman.co.uk, says: "The first steps of any new savings product are bound to be a little wobbly but by the time it's reached its third birthday, you'd think there’d be a much more widespread understanding of how a junior ISA works. Junior ISAs aren't the same as Child Trust Funds or adult NISAs (new ISAs), which may explain why parents haven't got to grips with them. Junior ISAs aren't the only way to save or invest for a child, but it's vital that parents understand how they work so they can make an informed choice.”
Junior ISA basics
- A junior ISA has to be opened by a parent or guardian on behalf of their child but once the child reaches 16 they can decide where their junior ISA money is saved or invested.
- Parents or guardians, family and friends can pay into a junior ISA every year, up to an overall limit. The junior ISA limit is £4,000 in the tax year 2014/15 but it changes every year.
- Children can have one cash and one stocks and shares junior ISA.
- Money cannot be withdrawn before the child is 18 when the junior ISA matures and it is theirs to manage. It's automatically rolled over into an adult NISA unless the child withdraws the money.
- Children cannot have a junior ISA if they already have a child trust fund and currently a child trust fund can't be transferred into a junior ISA, although this is due to change in April 2015.
- Not all accounts accept money transferred from another junior ISA.
- You can compare best buy JISAs using Moneyfacts.co.uk.
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