What is a Junior ISA?
A Junior ISA (JISA) is a long-term savings or investment plan that can be opened by a parent or legal guardian to invest in their child’s future, allowing their child to receive a tax-free lump sum once they’ve turned 18 years old. This also allows you to save for their future without paying income tax or Capital Gains tax on any returns.
Discover more about our Junior ISA in this video:
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A Junior ISA (or a JISA) is a tax-efficient individual savings account made for children, which allows you to invest towards a cash lump sum for your child. As you won’t be taxed on any returns on the money you invest, you can give your child they ultimate tax-free cash gift when they turn 18 years old.
A parent or guardian can set up a Junior ISA and invest towards their child’s future firsts, whether it’s their first car, a housing deposit, or university education. In addition, once you’ve opened a plan, you can manage all of your child’s savings online, such as topping up or adjusting how much you want to invest. Friends and family can pay in too, making a Junior ISA an ideal way for relatives to gift money to your child.
From just £10 a month, or with a one-off payment from £100, you can open a plan for your child and start saving for their future. The Junior ISA savings limit is decided by the UK government, and you can invest up to this amount each new tax year.
With our Junior ISA, your money is invested into a With-Profits fund, which is a ready-made fund made up of a variety of assets, which are actively managed by fund managers who monitor the market to ensure your money is protected from market volatility and your child gets the most out their Junior ISA.
We aim to pay returns on your child’s savings in the form of bonuses paid directly into their plan. As our main aim is to pay bonuses consistently in the longer term, when the market has performed well, we may hold back some of the returns gained so we can still aim to pay bonuses when the market performs poorly.
The effect of this is known as “smoothing” as it leads to a smoother overall investment journey where the daily ups and downs in the market are levelled out.
In fact, since the launch of our Junior ISA in 2011, we’ve been able to pay bonuses consistently, and we continue to be trusted by parents to grow their children’s investment in the long term.
As with any investment, the value of the investment in your child’s Junior ISA can rise and fall, depending on market conditions; however, our premium guarantee means that, if you remain invested with us until your child turns 18, you are guaranteed to receive all of the money you’ve paid into the plan, plus any bonuses.
You can relax knowing that every single penny will go back to your child and help towards their future.
How does a Junior ISA work?
As a Junior ISA is a long-term savings or investment plan, it is designed for you to make one-off payments, or regular payments over many years whilst receiving interest or potential investment growth.
Each year you have an annual Junior ISA allowance that is set by the Government, which is the limit that you can save or invest tax-efficiently into a Junior ISA each tax year. In the 2022/23 tax year the annual Junior ISA allowance is £9,000.
To be eligible to open a Junior ISA you must be:
- Aged 16+
- A resident of the United Kingdom (excluding the Isle of Man and Channel Islands)
- The child’s parent or legal guardian OR the account holder (if you’re aged 16-17)
A parent or legal guardian has control over the child’s account while they are under 16, however once the child is aged 16-17 they have the option to take control of the account should they wish to.
Who can contribute to a Junior ISA?
While only a parent or legal guardian can open a Junior ISA, family and friends are able to contribute into the plan alongside them to help the child’s fund grow. Contributions can be made either via Direct Debit or lump sum and payments can be made from just £10 a month into the Shepherds Friendly Junior ISA. To contribute to the Junior ISA of a child you know, call the Shepherds Friendly member services team at 0800 526 249.
The amount you choose to invest for a child is entirely up to you, however it cannot be more than their annual Junior ISA allowance (£9,000 as of 2022/23).
How many Junior ISAs can you have?
There are two types of Junior ISA:
- Cash Junior ISA
- Stocks and shares Junior ISA
You can invest in one of each type of Junior ISA every tax year, a stocks and shares Junior ISA and a cash Junior ISA. With a stocks and shares Junior ISA you will pay no income tax or Capital Gains tax on any potential investment returns. Whereas for a cash Junior ISA, you pay no tax on interest on the cash you save.
While you can add money into both types of Junior ISA, the total amount across both will count towards your annual Junior ISA allowance. E.g. you can invest £6,000 in a stocks and shares Junior ISA and £3,000 in a cash Junior ISA tax-efficiently.
What happens to a Junior ISA at 18?
When your child turns 18 years old and their plan reaches maturity, we will send them the information they will need to withdraw the funds, they will also be given the option to continue investing with us in an adult ISA.
How to set up a Junior ISA?
A Shepherds Friendly Junior ISA can be opened online, or over the phone in as little as 10 minutes.
The online application form will ask you to enter your personal details and how much you wish to invest for your child, starting from just £10 a month. Once you’ve completed the form, you will receive a confirmation email containing all of the important information regarding your child’s Junior ISA and how to access the account online.
Be sure to read through our Important Information Guides for all the key information about our Junior ISA. Remember that when you invest, your capital is at risk.
More information about junior stocks and shares ISAs
Important things to consider
- Past performance cannot be taken as a guarantee of future returns.
- The value of the JISA depends on the future performance of the investments held in the fund and the bonuses we distribute from any profits arising from these investments.
- HM Revenue and Customs may change the tax status of a Junior ISA in the future.
- Inflation may affect the purchasing value of the investment in the future.
- The money invested into a Junior ISA cannot be withdrawn early; it can only be withdrawn by the child when they reach the age of 18 years old.
- If you transfer the plan to another provider, or if you leave the money invested for more than three months after the child’s 18th birthday, then we will calculate the value of the investments that you hold within the With–Profits Fund to ensure that you leave with your fair share. If you have been invested through periods of poor investment performance, you may get back less than the current value of your plan. This is known as a Market Value Reduction (MVR).
When you take out an investment product with us your capital is at risk and you may get back less than you have put in. All references to taxation are to UK taxation and are based on Shepherds Friendly Society’s understanding of current legislation and H M Revenue and Customs practice which may change in the future. Investment growth is by means of bonuses, the amount of which cannot be guaranteed throughout the term of the contract. Please ensure that you read the full terms and conditions of this plan which are available from your financial adviser or by contacting us directly.
Please note: No advice has been given by Shepherds Friendly, and if you are in any doubt as to whether an investment plan is suited to your needs, then you should contact a financial adviser. There may be a charge for financial advice, and the cost should be confirmed to you before any advice is given.