Stakeholder Junior ISA
The Stakeholder Junior ISA is the one of the most effective ways to save for your children’s future. These accounts work by investing your children’s money into a variety of different company’s shares when the account is opened. When your child reaches 13, the money is withdrawn from the shares and reinvested into lower risk assets or investments. This will protect your child’s money in the period running up to their 18th birthday and is better known in the industry as styling.
The money is locked away in the Stakeholder Junior ISA until the child’s 18th birthday, by which point it should have grown sufficiently to pay towards a car, university or even a house deposit.
All interest earned on the money in these accounts will be paid tax free, and this will not affect your other tax rights.
Whilst the figures for how much you can top up these accounts have yet to be announced, the Child Trust Fund, the Junior ISAs predecessor, allowed you to invest as little as £10 a month, or up to £1,200 a year.
A stakeholder Junior ISA will encounter fees for investing the money, in the same way you would pay a fund manager to look after your investments as an adult. The government limited these fees at 1.5% (so £1.50 for each £100 in the account) for the Child Trust Funds and is expected to carry these rules over to the Junior ISA.
The biggest advantage of the stakeholder Junior ISA is that history shows that money invested in the stock market tends to pay more than money invested in a savings account over a longer period. The money is also reinvested in lower risk stock for the last five years, protecting your investment.
To open an account for your child you need to be a UK resident eligible to pay tax.