Savings plan -> Junior ISA

thelawnet

My son has an M&G Savings Plan with £25 pcm invested. The value is approximately £6,500. The Savings Plan is in my name with his initials after (designated account I think this is?).

He is 16 years old, will be 17 in June.

As I understand it, the money in the Savings Plan is essentially mine to dispose of, so I can pay in £4260 into a new Junior ISA now, then close the Savings Plan into my bank account on 6th April, and pay the difference between the value then and the £4260 I've paid in now into the Junior ISA?

Alexland

You would have to check the status of the M&G account with them if you are not sure.

16 and 17 year olds are at a particular advantage in that they have both a Junior ISA and an adult ISA allowance.

If your son is likely to use the money in the next 5 years then consider derisking into cash products. In particular he may want to start feeding an adult HTB ISA for the preferential interest rates.

Alex

xylophone

Assuming that the account is merely "designated" and not held in bare trust, the money is yours and you can do as you suggest.

If held in bare trust, you should be able to sell the appropriate number of units within the investment and direct M&G to transfer to the JISA in this tax year and the balance in next tax year.

Assuming that your son does not already have a JISA, he can open one now with Coventry BS which is currently paying the best rate for cash.

He will be able to access the money at age 18.

https://www.coventrybuildingsociety.co.uk/consumer/product/savings/children/junior-cash-isa.html

thelawnet

Alexland wrote: »

You would have to check the status of the M&G account with them if you are not sure.

16 and 17 year olds are at a particular advantage in that they have both a Junior ISA and an adult ISA allowance.

If your son is likely to use the money in the next 5 years then consider derisking into cash products. In particular he may want to start feeding an adult HTB ISA for the preferential interest rates.

Alex

Doesn't a junior ISA have better interest rates?

As I understand it:

Junior ISA till 18, cash or shares, best cash rates
Help to Buy Isa, from16, worse cash rates no shares, 25% bonus paid only on completion of a house purchase, can be withdrawn or transferred at any time without penalty
Lifetime ISA, from 18 cash or shares, up to £4k per year; 25% annual bonus, if fed with proceeds from HTB ISA there is no bonus from the HTB, so there is no material advantage to opening a HTB at this point

As I understand it there was an advantage to the HTB ISA in the previous tax year, but it's too late now. So you might as well have a junior ISA.

Alexland

thelawnet wrote: »

Doesn't a junior ISA have better interest rates?

There is no golden rule on this as banks tend to give good rates to both children and first time buyers to buy their lifetime loyalty. But yes at the moment the MSE best buy tables are 3.6% on JISAs and 2.58% on HTB ISAs. However slowly feeding the HTB ISA offers the chance to get a 25% bonus on the account balance for a qualifying property purchase which may be of interest?

Alex

thelawnet

Alexland wrote: »

There is no golden rule on this as banks tend to give good rates to both children and first time buyers to buy their lifetime loyalty. But yes at the moment the MSE best buy tables are 3.6% on JISAs and 2.58% on HTB ISAs. However slowly feeding the HTB ISA offers the chance to get a 25% bonus on the account balance for a qualifying property purchase which may be of interest?

Hmm, it doesn't seem very compelling in that the 25% bonus is only paid on completion of a property, and you can't use both a LISA & a HTB ISA to buy.

The advantage is that you can't open a LISA at 16, but you can open a HTB ISA; the disadvantage is that unless you use the HTB ISA to buy a house (and therefore don't use the LISA), there's no bonus earned from it.

If I were to invest £4k into the HTB ISA before he is 18, then when he's 18 he can transfer the £4k into a LISA. But there's no difference in that respect between investing £4k into a LISA in when he turns 18, having previously held the money in a shoebox (ok, £80 interest or whatever), and putting £4k into a HTB ISA and then transferring it to the LISA. Transfers from the HTB ISA to the LISA don't earn the HTB ISA bonus, they are just treated as cash into a LISA, which would earn a LISA bonus anyway.

There doesn't seem to be any compelling reason to have a HTB ISA in that the LISA bonus can grow much bigger than the HTB ISA can.