Junior Isas no panacea

ON TUESDAY, a new product was born. For months, providers have been working overtime, trying to enthuse parents with a desire for Junior Isas. The table shows the offerings on the cash side, with the big banks yet to step into the ring.

Junior cash Isas don’t match up to current inflation at 5.2 per cent, but there are plenty of equity funds on the market to shelter under. For these, research or sound advice is a must.

Junior Isas are the offspring of the now redundant child trust fund (CTF). In trying to induce people to save for their children the previous government gave a sum of £250. Although spending other people’s money that could be ill-afforded, this did stimulate more parents to save. But now CTF parents have been cut adrift in a diminishingly competitive market. It is vital that these are now incorporated into the new regime.

As much as the government wants everyone to save, in reality Junior Isas are a product for the relatively wealthy – another place to protect wealth from increasingly punitive taxation. As the child gets full control of the money on their eighteenth birthday, parents shouldn’t put all their nest eggs in one shelter – their child might not choose to spend it sensibly on university fees or a first deposit. Peter Chadborn of Plan Money advises clients to utilise their own Isa allowances first, to retain control, regardless of the purpose.