The Junior ISA (JISA) is a scheme initiated by the government aimed at encouraging parents to invest
money on behalf of their children. The JISA is an efficient and effective way for parents to plan for, and
safeguard, their child's future in an uncertain financial world.
Just as with an adult ISA, all investment returns are free from income or capital gains taxation. However,
unlike the adult ISA, investments cannot be cashed in before the JISA - and the child - mature at 18 to
ensure they provide maximum benefit for the future financial stability of the child.
The Junior ISA is a tax-efficient investment wrapper that enables parents, grandparents, friends and
guardians to invest on a child's behalf, with any income and profits earned on the investment
A total of £3,600 can be set aside each tax year for a child in a JISA wrapper, and the account can be
accessed on their eighteenth birthday. A range of accounts are available for selection dependent upon
individual circumstances. As with adult ISAs, these include stocks and shares and cash options, provided
by banks and building societies, to benefit from the tax advantages.
Why were they introduced?
The JISA was introduced to replace Child Trust Funds, which were scrapped in January 2011.
Investments can be made to a Junior ISA each year and the money invested will grow over time and be
available to the child on their 18th birthday. Therefore a Junior ISA was introduced to be a tax efficient
way to save for a child's financial future by providing families with a simple, transparent, accessible and
competitive product. One which instantly creates the conditions for families to save more for their
children than they otherwise would and as such create and develop an environment of responsible
Who is eligible?
Children under the age of 18 who are resident in Britain and do not already have a Child Trust Fund are
eligible for a Junior ISA.
Children aged 16 or over can open a JISA themselves rather than rely on their parents - otherwise a
parent or guardian will have to do this on their behalf.
What are the benefits?
The cost of having a child is increasing faster than ever before as new reasons for expenditure arise
almost daily. The rising cost of modern tuition fees for higher education and the expense of getting a
foot on the property ladder are just two highly significant examples. As a result the financial future of
the next generation is set to be an extremely turbulent environment without parents' help.
The Junior ISA scheme is therefore aimed at encouraging parents and young people to save efficiently -
and to give them a head-start in life.
Parents, grandparents, family and friends are all able to put money into a child's JISA, so birthday and
Christmas money can be added to it, for example. Over time, the hope is that the amount will grow into
a substantial fund for the child's future. Children are currently limited in the amount of tax they can
shield from HM Revenue and Customs (HMRC) and as such a Junior ISA is a way of side-stepping this
Using investment options like junior ISAs in order to develop financial skills in young people is also
arguably a sensible and effective way of complementing their ongoing education.
How do they work?
Like an adult ISA, a JISA is a wrapper in which any stock or fund can be placed - or this can be held as
cash if avoidance of the stock market is desired. Alternatively, the money may be saved as cash to be
invested at a later stage.
However, unlike adult ISAs, investors must choose just one provider at a time to manage their
investment JISA and one provider to manage their cash JISA. For example, a cash account cannot be held
with one provider one year, and another the next, unless the balance is transferred across - but this can
be done with an adult ISA.
With investment discipline and the right environment, the sum that can be saved for a child could be
significant. However, the annual allowance cannot be rolled over to the next year and so if the full
tax-free allowance is not used within a defined 12 month period, then it is lost. Investment options offer
valuable flexibility and include lump sum investing and regular saving from £50 a month.
Those who can afford to make the maximum contributions could see their child start university with a
fund worth more than £100,000 at growth of 4% a year.
• Cash or stocks and shares can be held in Junior ISAs.
• Returns are tax-free.
• Annual contributions are capped and there is no government contribution to the account.
• Money placed in the account will be owned by the child.
• Funds will be locked away until the child reaches eighteen.
Please do remember, the eligibility to invest in an ISA will depend on your individual circumstances, and
all tax rules may change in the future.
The value of investments can go down as well as up and you may get back less than you invested.