Child's ISA account, best option?

jmb1

My 11 year old son has a Halifax JISA we opened in 2019 paying 3.65%. It's balance is currently £3.5k and we pay £450 per year in total into it, last year's credit interest was £80.99.

We don't want access to the money until he is 18. (Its intended to go toward uni costs). 

So just wondering if this is the best place for the lump sum and for future payments or should we go for a different saver account? Obviously being tax free is important but at these figures would a regular saver be tax free anyway but pay a better interest rate? We don't have a great fear he'd withdraw it if he did have access (he doesn't really know the money even exists so on a need to know basis, prob wouldn't tell him until 18th birthday! (Something that I'd hope would happen but didn't in my childhood haha!).

Any advice greatly appreciated.

xylophone

We don't want access to the money until he is 18. (Its intended to go toward uni costs). 

 The money cannot  be accessed  until the age of 18 and even then only by the young person in whose name it stands.

He may control it from the age of 16 if he wishes.

https://www.gov.uk/junior-individual-savings-accounts

JISA rates here - unless you live in Bath Coventry offers the best rate.

https://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

Other child account rates under the JISA chart.

 If you/spouse wish to keep control of any money you save for your son's future, you should keep it in your pwn name(s) and gift (or not) at a time of your choosing.

refluxer

jmb1 said:

My 11 year old son has a Halifax JISA we opened in 2019 paying 3.65%. It's balance is currently £3.5k and we pay £450 per year in total into it, last year's credit interest was £80.99.

We don't want access to the money until he is 18. (Its intended to go toward uni costs). 

So just wondering if this is the best place for the lump sum and for future payments or should we go for a different saver account? Obviously being tax free is important but at these figures would a regular saver be tax free anyway but pay a better interest rate? We don't have a great fear he'd withdraw it if he did have access (he doesn't really know the money even exists so on a need to know basis, prob wouldn't tell him until 18th birthday! (Something that I'd hope would happen but didn't in my childhood haha!).

Any advice greatly appreciated.

A regular saver may sometimes pay a better rate than a Junior Cash ISA but to ensure that the interest your child earns is tax-free, then you need to consider your own tax position and whether you pay tax on your own savings interest or not because when interest earned by money given to your child by you (outside of a Junior ISA) reaches £100 or more (or £200 as a couple), then the whole amount is then potentially liable to tax at your own rate (essentially, all the money that you've given them is considered to be yours when working out your taxes).

From https://www.moneysavingexpert.com/savings/child-savings-tax-free/

The tax implications

If it's their own money, children can earn the same £18,570 a year in interest as adults before it gets taxed. However, don't assume you can dunk fortunes in your kid's name.

As we've explained, if a child generates more than £100 in interest over the course of a year, from money specifically given by each parent (or step-parent) (so £200 for a couple with a child), this income falls under that parent's PSA. And if they've used their allowance up, it'll be taxed at their rate.

One way around this is with a junior ISA, where you can save £9,000 in your child's name, which is free of tax regardless – read our full Junior ISA guide.  


Whatever you decide, you can currently do a lot better than the Halifax's 3.65% for his JISA - the highest-paying Junior Cash ISA is currently with the Coventry BS at 4.95%, although it's also worth checking the rates offered by any local building societies, as these don't always get featured on comparison sites due to geographical restrictions.

Speaking of the Halifax - they actually have the highest-paying kids' regular saver at the moment but, at 5.50% and due to the nature of how regular savers work, it won't earn much more over the year than putting it into a 4.95% Junior Cash ISA.

One downside to most JISA providers is that they don't provide online banking access, so you'll have to apply and/or manage the account by phone, branch or post. A few providers like NS&I and Tesco do provide online access (which is essentially limited to checking the balance due to the nature of the account), but their rates aren't the highest (although they are higher than the Halifax).

As mentioned above, one important thing to realise is that the only thing you can do with the money already in your son's JISA is to transfer it to another JISA (eg, in order to get a better rate) - you can't withdraw it.

Personally, as someone who now pays tax on their savings interest due to the high rates currently available, a Junior ISA makes good sense when saving for my children, but we have a good relationship and they have both been happy for me to continue managing their accounts until the age of 18 and assist them in making the best use of the money beyond that. It's worth noting that children will be entitled to their money when they reach the age of 18, regardless of whether it's in a Junior ISA or a normal savings account in their name.