The best Junior ISAs

by lovemoney staff on 03 April 2013  |  4 comments
Tweet

Take a look at these Junior ISA options, one of which offers a 6% return.

Junior ISAs (JISAs) are a great way to usher your kids into the savings habit early in their lives. Launched in November 2011, they allow funds to be paid into a tax-free savings account held in the name of an under-18 by a family member.

Like regular adult accounts, JISAs come in cash as well as stocks and shares varieties. Up to £3,600 (£3,720 from 6th April) can be invested in one or both types of JISAs (although the combined amount can't be over that limit) in the current tax year and the funds cannot be withdrawn until the child turns 18 – when the account turns into a regular adult ISA.

However, one downside with these ISAs is that they are not available to any child who holds a Child Trust Fund, the Government-backed scheme that closed to new business in 2011.

So what are the best JISAs around at the moment? First up, the cash variety…

Halifax’s 6% Junior ISA

Halifax has the top-paying Cash JISA with a variable rate of 6% – but you will have to jump through a hoop to get hold of it. The person with ‘parental responsibility’ for the JISA will also need to open up a regular Halifax ISA, although you only need to deposit £1. If a parent doesn't have a Halifax ISA, the interest rate is currently 3%.

So how do Halifax's regular adult rates stack up?

If you’re after an easy access account, Halifax’s ISA Saver Online offers 1.95% for 12 months on a minimum balance of £1 (transfers from other ISAs are also allowed). After the first year, the rate drops to a paltry 0.25%.

But even with the temporary bonus, this account is still fairly middle-of-the-road for easy access ISAs. 

If you’re definitely after a Halifax account you’ll get a better rate if you’re prepared to lock your cash away for a set period. Here’s how the bank’s Fixed ISAs stack up:

Transfers in are allowed from other ISAs.

So, lock away your cash for three years and you’ll earn 3.00% on your adult stash and be eligible for the 6% Junior ISA. Not a bad savings duo in the current climate. It's worth pointing out you can only open the Junior ISA in a branch.

Other cash options

But if that sounds like too much hassle, here are some other Junior Cash ISA options:

*Must be opened in a branch

Nationwide’s Smart JISA is a competitive offering at 3.25%. However, the account is boosted by a 1.15% bonus that will fall away after 12 months, leaving you earning just 2.10%.

Meanwhile, the Coventry Building Society's Junior ISA offers the same interest rate with no bonus tied in.

Stocks and shares Junior ISAs

Stocks and shares Junior ISAs will usually offer a better return than Cash JISAs, but they are riskier. There is obviously the potential that you could lose money – a threat that is not there with the Cash ISA.

Picking a stocks and shares JISA is slightly trickier than choosing a cash account. If you already have an adult stocks and shares ISA, try speaking to your existing provider about what they have to offer. Otherwise it’s just a case of shopping around for low management charges and fees. And beware of companies offering incentives such as free shopping vouchers in an attempt to blind you to the small print.

Asking a question on our Q&A board to get some advice from other more seasoned savers is another good idea.

And remember, if you don’t use your or your child's annual ISA or JISA allowance by the end of the financial year – 5th April – you’ll lose them.

Have you got one?

Have you – or more accurately, your kids – got a Junior ISA? Let us know about your experiences in the Comments box below.

This article is regularly updated to reflect changes in rates

More on ISAs

The UK’s best Cash ISAs

The UK’s best stocks and shares ISAs

How self-select stocks and shares ISAs work