National Savings and Investments (NS&I) have entered the Junior ISA market.
In 2011, the Junior ISA (JISA) was introduced as a replacement for the Child Trust Fund and, after a slow start, momentum has built and, according to the latest figures from HM Revenue & Customs (HMRC), JISAs now hold over £2,750 million of investments for children under age 18.
NS&I have long been a player in the main cash ISA market, but never offered a junior version until last month, with its new launch.
The plan’s main features are:
- A variable interest rate of 2% (against 0.75% for NS&I’s Direct ISA, their mainstream cash ISA );
- Transfers in (from other JISAs and Child Trust Funds) are allowed (and again, that is a difference from the ‘new contributions-only’ Direct ISA);
- No penalties on transfer out (although access to cash is normally not possible before age 18); and
- It’s online only.
NS&I sometimes top the cash ISA tables with their interest rates, but the new JISA runs absolutely no risk of doing so, as the top variable rates currently are around 3.25%. (Savers Friend 20/09/2017)
Latest HMRC statistics tell us that, as at April 2016, almost two thirds of JISA money is invested in cash accounts, with stocks and shares accounts making up the remainder. This is a higher proportion than for adult ISAs, where stocks and shares ISAs are just in the majority.
The logic behind this difference is puzzling because many JISA owners are young enough to have an investment horizon which makes stock and shares ISAs look a much more sensible option than cash.
Please Note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. Stocks and shares ISAs invest in corporate bonds; stocks and shares and other assets that fluctuate in value. Investors do not pay any personal tax on income or gains, but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA managers.