MSE News: Lloyds TSB first big bank to launch junior cash Isa

Former_MSE_Helen

This is the discussion thread for the following MSE News Story:

"Lloyds will become the first major bank to launch a junior cash Isa, three months after the savings mechanism launched ..."

Read the full story:
Lloyds TSB first big bank to launch junior cash Isa

Charliechap1980

As i believe Martin said a while ago, we all get a tax free allowance even if you a child. So a junior isa is no different from a Childrens saving account.

The one i have currently is the Halifax kids regualr saver 6.0% AER bank account.

so is a junior isa of 3.01% better than this account?

The halifax account figures out the interest at the end of each month on the current balance, not at the end of the year based on the whole balance, is this how isa's work?

if so my question again is which account is better?

anselld

Charliechap1980 wrote: »

As i believe Martin said a while ago, we all get a tax free allowance even if you a child. So a junior isa is no different from a Childrens saving account.

The one i have currently is the Halifax kids regualr saver 6.0% AER bank account.

so is a junior isa of 3.01% better than this account?

The halifax account figures out the interest at the end of each month on the current balance, not at the end of the year based on the whole balance, is this how isa's work?

if so my question again is which account is better?

There are advantages of the JISA later in life as the child can accumulate multiple years JISA allowances by the time they reach 18.

Also 16 and 17 year olds can have both JISA and ISA allowances.

However in the short term the reg saver is obviously better for a non-tax payer. You could put the proceeds into JISA at the end of the 12 months though.

JimmyTheWig

All accounts pay interest on the balance on a daily basis, Charliechap. The difference between the two accounts you mention in this regard is that in the ISA (or any normal savings account) you can put a lump sum in at the beginning of the year and you will get interest on the whole balance for the whole year. With a regular saver you can only drip-feed the money in.

But even so, I would be shocked if the 3% Junior ISA beats your 6% regular saver under any circumstances.
I presume, however, that your regular saver money only earns 6% for a year. Then the lump sum at the end goes into a different account? It might be worth considering a Junior ISA for this different account for the money to go into at the end of the year.

The big advantage (and I think this will only be of benefit to the wealthy) is that money put into a Junior ISA will stay tax free as long as it is in an ISA wrapper. Say, for example, you've built up £10,000 in your child's account by the time they start work. If you use normal savings accounts they will start to pay tax on the interest on this money because they are working and earning over the threshold. They could put the money into an (adult) ISA but not all of it as it is above the annual limit.
If the £10k is in a Junior ISA then they can convert it to an (adult) ISA and the interest stays tax-free.

Probably not worth losing interest for, certainly at the start of a child's life. Might be worth starting to move money across into Junior ISAs for the above reason as they approach adulthood if you've got more than the annual allowance in there for them.

nzseries1

So if I'm feeling generous (and suddenly rich) and decide to start up a university fund for my nephew now, can I take out an ISA in his name and start paying into it, knowing that the expectation is he won't touch it until he's 18? That's about the only use I can think of for this JISA thing.

Mikeyorks

nzseries1 wrote: »

can I take out an ISA in his name and start paying into it, .

'Fraid not .... unless you have parental responsibility? The Junior ISAs have the same basic rules as ordinary ISAs - so a free for all would likely result in breaching the rules on only paying in to one (cash?) ISA in a tax year.

nzseries1

Mikeyorks wrote: »

'Fraid not .... unless you have parental responsibility? The Junior ISAs have the same basic rules as ordinary ISAs - so a free for all would likely result in breaching the rules on only paying in to one (cash?) ISA in a tax year.

No I dont... I forgot about the whole only one per year thing. Hmm, well, they seem a bit pointless to me then.

emweaver

The 6% Halifax isn't as good as it sounds, I received the same interested on my dd1s account as my other dd did on her Lloyds child savings account rate of 3%, despite having the same balance at the end of the year. The balance in the 6% account is transferred out yearly which limits how much interest they can get.

opinions4u

emweaver wrote: »

The 6% Halifax isn't as good as it sounds, I received the same interested on my dd1s account as my other dd did on her Lloyds child savings account rate of 3%, despite having the same balance at the end of the year. The balance in the 6% account is transferred out yearly which limits how much interest they can get.

Q: If you'd built up the balance of the Lloyds account in equal monthly instalments, how much interest would you have got?

A: About half the amount of the Halifax account.

Banks do not pay interest based on the balance at the end of the year. The pay it based on the balance at the end of each day.

6% is better than 3% for accounts used in identical ways. Always has been. Always will be.

Biggles

Charliechap1980 wrote: »

my question again is which account is better?

In 12 months, your Halifax Reg Saver will have matured, with a maximum of £1,200, and be closed, with interest totalling a grand £36.

Where will you(r child) go then?

Junior ISAs will continue to be tax-free for 18 years and the family can fund them up to £3,600 each year.

JimmyTheWig

emweaver wrote: »

The 6% Halifax isn't as good as it sounds, I received the same interested on my dd1s account as my other dd did on her Lloyds child savings account rate of 3%, despite having the same balance at the end of the year. The balance in the 6% account is transferred out yearly which limits how much interest they can get.

As per opinions4u, the Halifax account had, on average through the year, half the balance that the Lloyds account did.