The Association of Investment Companies says that the final rules for junior ISAs should encourage more providers to enter the market to deliver cheaper, better performing savings opportunities.


Due to launch on 1st November 2011, the junior Individual Savings Account should help families to tax efficiently save for their children’s university fees, their first car or even towards their first house.

The final rules that have been put in place have not only raised the initial limit from £3,000 to £3,600 a year, the product providers have also been given a lot more flexibility in the type of product they can offer consumers.

The Director General of the AIC, Ian Sayers, said “Junior ISAs offer a straightforward way to save for children tax efficiently. The use of the well-established ‘ISA’ brand should help build confidence and familiarity with the product.

The Junior ISA will create even stronger incentives for those committed to saving for their children. An annual investment of £3,600 into the average investment company over the last 18 years would have grown to £147,541 which would be an impressive nest egg,”

With university fees looking to go only one way and house prices seeming to be able to defy gravity giving your offspring a tax free helping hand can be no bad thing.

But there is the worry that not many people these days have the spare readies to put away until the child reaches 18. Then what do they spend it on? The biggest 18th birthday party ever?

Seriously though, parents, grandparent and friends should maybe buy smaller birthday and Christmas presents for their children and put the rest in one of these junior ISAs. Or, if they are not using their own full annual allowance and might need the cash quickly, then put it in their own ISA.

The AIC provided some returns estimates as follows:

Share price total return on £3,600 per year over 18 years (to 30 June 2011)

Average investment company

147,540.98

Average Global Growth Investment Company

143,694.95

Average UK Growth Investment Company

166,782.81

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Share price total return on £300 per month over 18 years (to 30 June 2011)

Overall Weighted Average

141,867.29

Weighted Average Global Growth

137,509.78

Weighted Average UK Growth

158,944.08

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Share price total return on £50 per month over 18 years (to 30 June 2011)

Average investment company

23,644.55

Global Growth

22,918.3

UK Growth

26,490.68

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Let’s hope that these do encourage friends and family to put money aside for the children’s futures.

The junior ISA is also covered by the Financial Services Compensation Scheme.

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