Product review: JISAs from Coventry BS, Pilling & Co

Now that the end of the tax year has come and gone, ISA season is safely behind us for another 12 months, but that does not mean people should not plan ahead.

With this in mind, both Coventry Building Society and Pilling and Co have launched junior ISAs (JISA) to lure in early savers.

The Coventry cash product offers an interest rate of 3.25%, of which none is a bonus designed to lure in new customers, meaning that holders will not necessarily have to switch providers to find a better deal after 12 months.

It has a minimum investment of £1 and accepts transfers-in from other JISAs. Interest is paid annually, on 30 September, and on the child’s 18th birthday.

Pilling & Co’s managed JISA is invested in the Baillie Gifford Managed fund, the same place where the company’s current child trust funds (CTFs) are invested.

While there are no charges for the JISA, the fund comes with a 4% initial and 1.5% annual charge. Minimum investment is £10pm.

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With belts across Britain collectively tightening, many feel they do not have the spare cash each month to save for the little ones.

However, finding saving just £10pm from birth can lead to a large sum once a child turns 18. Unlike CTFs, there are no contributions from the Government into JISAs, so parents and grandparents are on their own when it comes to saving for children.

Like ISAs, JISAs can be invested in cash, for the more risk averse, in stocks and shares for those with a greater risk appetite, or a mixture of the two – as long as only one of each is held at any one time.

Investment wisdom says that over the long term, equities will outperform cash. However, when dealing with your offspring’s money it is understandable that many may want to be cautious and opt for cash.

The Coventry product is at the upper end of the cash rates on offer thee days. Nationwide also offers 3.25% on its JISA, but 0.9% of this is a bonus only valid until 31 January 2014, after which savers would need to switch to get a better rate.

For Pilling & Co’s stocks and shares option, the Baillie Gifford Managed fund has outperformed its benchmark consistently over five years but, thanks in part to the financial crisis, has only produced annualised returns of 2.7% in the same period.

As with all JISAs, the child cannot access the money until age 18, so those wanting the flexibility to dip into from time to time should look elsewhere. Likewise, because it is in the child’s name, those not wanting an 18-year-old to run wild with the account should look at other savings options.

laura.suter@ft.com