Stick with bare trust for child or switch to Junior ISA

grey_lady

Hi,

A year ago I opened a H&L vantage fund&share account designated as a bare trust for a baby, it has about £1000 invested in HSBC FTSE All share.

H&L have just sent me some information on their new Junior ISA's and I'm wondering whether to switch to that and possibly even switch into a different fund as their information recommended a couple as being suitable for the new Junior ISA.

Should I switch? is a Junior ISA more tax efficient than a bare trust?

Reaper

Can't say I've looked at Junior ISAs in details as my baby is too old for it.

Speaking generally though my understanding is:
1) If it is YOUR baby then a Bare Trust unlike a Junior ISA may end up paying tax if the income from it breaks the £100 rule. However if you are any other kind of relation you can ignore this.
2) Junior ISAs have a limit how much you can pay in each year. A bare Trust is unlimited.
3) Although pretty good for inheritnace tax avoidance a Bare Trust can fall foul of it on any contributions you made in the last 7 years before death. I believe a Junior ISA is exempt (but better check I got that right).

Apart from that compare the fees on both as Hargreaves Landsdowne introduced new charges on trackers recently.

grey_lady

Just called HL and the min lump sum for JISA is £500 which is better than the £1000 otherwise the charges will be the same if I keep the money is the same fund. There's also a free pencil case with the JISA :-)

xylophone

For tax purposes it is important to know who settled the money in the bare trust (parent(s) or another person).
http://www.hmrc.gov.uk/trusts/types/minors.htm
http://www.parmentierarthur.co.uk/pdf/july09article.pdf

Rules for Child Trust Fund or Junior ISA are different
http://www.moneysavingexpert.com/savings/junior-isa?utm_source=forum&utm_medium=clicks&utm_campaign=resourcebar
http://www.moneysavingexpert.com/savings/child-trust-fund-vouchers