InvestmentsSep 11 2019

Investing in your child’s future

  • Describe the different ways a parent can open an account for their child
  • Describe some of the advantages and disadvantages of a Jisa
  • Identify how an investment account can be opened for a child
  • Describe the different ways a parent can open an account for their child
  • Describe some of the advantages and disadvantages of a Jisa
  • Identify how an investment account can be opened for a child
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Investing in your child’s future

It is not permitted for a CTF and a Jisa to be held for the same child, however since April 2015 it has been possible to transfer a CTF to a Jisa if the transfer is made as part of the Jisa account opening process.

Subscription limits for both Jisas and CTFs are £4,368 for the 2019-20 tax year.

This rises annually in line with the consumer price index and is always rounded to be divisible by 12 for those wanting to make regular monthly payments. Although the limits are the same, they are separate allowances and the rules are slightly different.

The CTF year runs from the child’s birthday, whereas the Jisa runs in tax years.

If you are considering transferring a CTF to a Jisa this gives an opportunity for a triple subscription in one year.

Let us take ‘Josh’ as an example.

Josh’s birthday is October 1 and he currently has a CTF, but his parents are thinking of moving it to a Jisa.

No payments have been made into his CTF since his last birthday, but his parents have a bit of spare cash and now want to maximise the subscriptions.

They can pay in £4,368 before September 30 and another £4,368 on October 1 in the new CTF year.

If they then make the transfer to a Jisa they can make a further subscription of £4,368 to the Jisa once the transfer has completed.

This allows a total of £13,104 to be subscribed in one tax year. The next date the Jisa could be subscribed to would then be April 6 at whatever the new subscription limit is for2020-21.

Even without a bumper year with extra subscriptions, an organised parent who sets up a Jisa shortly after their child is born and pays in the maximum at the start of each tax year, could see their child have a fund in excess of £150,000 by their 18th birthday (assuming subscriptions increase 2 per cent a year and 5 per cent growth net of charges).

A fund that size would make a great 18th present, taking care of university fees and leaving enough for a hefty first house deposit, but parents should be aware that their offspring will be getting a letter from their Isa manager about it automatically converting to an adult Isa and the parental controls are off – an 18 year can withdraw funds as and when they like.

Junior pensions

Turning to pensions now and the option of setting up a scheme for a child.

This is definitely one for the long game, and primarily used by wealthy clients who have exhausted the Jisa allowance for their offspring.

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