Junior ISAs are a roaring flop

child moneyHow many babies do you think are born in the UK in a year? The latest available figures from the Office for National Statistics show that 723,165 children were born in 2010. This suggests that, since the birth cut-off date for Junior ISAs of 2 January 2011, over 1.145m children have been born who could have taken out a Junior ISA. And that’s not even counting those born before 1 September 2002 who are still aged under 16 and therefore also eligible to open one.

So given all these lovely babies and children, how many Junior ISAs had been opened by 27 July 2012? Only 72,000. A little over 6% of the eligible babies alone.

So why are Junior ISAs so overlooked? Brought in to replace the Child Trust Fund, where every child born between September 2002 and January 2011 was given £250 from the Government to invest in a protected account to which parents, grandparents and friends could also contribute, the problem with Junior ISAs is that they are a bit pointless.

Although children under 18 (you can take out a Junior ISA until aged 16, but it cannot be withdrawn until age 18 where is may be transferred to an adult ISA) are taxable people, most seven year olds do not have a job that earns enough to take them over the current £8,105 personal allowance threshold. Similarly, most of the nine year olds I know do not have large enough investment portfolios to warrant them needing to use their capital gains exempt amount of over £10,000 a year. As a result, the tax-free status of a Junior ISA is not a great incentive for their use. In fact, it is only likely to be the wealthy, whose children may indeed have (for example) trust income of over £8,000, who are likely to worry about their children’s tax bills.

So Junior ISAs must have stonkingly good rates to attract investors then? Um, no. According to Moneyfacts.co.uk, the best rate currently available for a Junior ISA is 3.25%. Compare this with the Halifax Children’s Regular Saver (starting at £10 a month) at 6%, the West Brom’s regular saver at 4.6% and  the Clydesdale’s 5 year bond at 4.05%, where you can get at your money in a maximum of 5 years (as opposed to 18 years).It’s no wonder that Junior ISAs are so glaringly unpopular.

As a basic rate taxpayer, you’d even be better off investing your money in a five year bond at 4.5% and paying the tax than using a Junior ISA.

So, given all the above, if you are one of the 72,000 people who have invested in a Junior ISA, please tell us why in the comments below. We’d really like to know.


  • JuniorISAInvestor
    Why? Because the Halifax Junior ISA pays 6% tax free, the kids can't touch the money until they are 18 (a good thing), and, as I'm sure you're aware, any parental gifts that result in income of over £100 give rise to an income tax liability at the parent's marginal rate. So if you gift your child more than £1000 at the start of the tax year, you reduce the overall tax liability for the child by using a Junior ISA...
  • Ambulance C.
    Well that's made things so much clearer.
  • Mr M.
    So if you're a rich Tory voter you're better off!
  • Sicknote
    I read about these and I'm not convinced to move my children's premium bonds just yet.
  • Tony B.
    Kids can't touch the money until they're 18? Yes, and when they're 18 they get sole control of the money. Into drugs, fast cars, prostitutes when you're 18? Result, you've got a Junior ISA coming your way! Yet, if you have a pension, you're not responsible enough to have it until you're 55, and even the just a quarter of the pot. Another crappy product devised by those in charge, fucking bellends.
  • foxes
    Why does giving money to your kids make you a rich Tory voter? If you can't afford to 'ave 'em, don't 'ave 'em! Etc.
  • Mr M.
    The way I read the article it's only really beneficial if you're invested over £8000 a year otherwise the incentives aren't worth it. Not many folks can afford that surely?
  • Barrie D.
    You seem to have completely ignored Stocks and Shares ISAs?

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