Parents shun their own savings to open Junior Isas for their children

2 weeks ago 3
  • Number of Junior Isas opened by parents since 2019 surges by 101%
  • Parents have been shunning their own Isas to open a Jisa for their children

By Helen Kirrane

Updated: 19:02 EST, 12 February 2024

Parents and guardians have been casting aside opening Isas for themselves to priotitise opening Junior Isas for their children, new data suggests.

Between October and December 2023, the number of Jisas opened by parents and guardians soared 101 per cent since 2019, exclusive data for This is Money from Scottish Friendly reveals.

It indicates that planning for future generations has assumed a greater priority for parents and guardians.

The shift of parents and guardians prioritising saving for their children over themselves has resulted in a drop in Isa investments over the same period, the figures show.

A present for the future: The number of Junior Isas opened by parents for their children surged 101% since 2019

Mothers lead the way when it comes to opening up new Junior Isas for children. Since the start of 2019, the number of new Jisas opened by mothers was up 115 per cent.

The number of fathers who opened a new Jisa for their children was up up 87 per cent by comparison.

The boost in Jisa investments was most prevalent amongst younger parents, aged 18-34. The number of Jisas being opened by parents in this age group has increased 35 times compared to 2019.

- See our table of the best Junior Isa rates here

The amount of money parents and guardians put into Jisas after the summer of 2023 was also up by 107 per cent despite ongoing living cost pressures and the impending Christmas period.

At this time, the best Jisa paid a rate of 4.7 per cent and was offered by Coventry Building Society, according to rate scrutineers Moneyfacts Compare.

The best Jisa rate is now 5.49 per cent and is offered by Bath Building Society. 

Every region across the UK saw an increase in new Jisas being opened by parents and guardians since the start of 2019.

But Scotland topped this with an increase of 191 per cent, closely followed by East Midlands, which saw a 147 per cent surge in the number of Jisas being opened.

Kevin Brown, savings specialist at Scottish Friendly, says: 'Clearly saving and investing for kids remains a top priority for families up and down the UK and more should be done to support and encourage this where appropriate.

'Recently the government has hinted Isa reforms may be coming and we believe that changing rules to allow other family members, such as grandparents to open Jisas too would provide a much needed boost to children's savings.

'Removing those restrictions can only help to put children on a stronger financial footing as they head into adulthood and so should be strongly considered in any planned reforms.'

New Isa age changes kick in April 2024 

As part of the Government's package of Isa reforms, set to kick in from April 6 2024, there will be a change to the age you can open a cash Isa.

At the moment you could open a normal adult cash Isa at age 16, whereas you need to be 18 to open an adult stocks and shares Isa.

The Personal Savings Allowance (PSA)

The PSA was introduced in April 2016, by then Chancellor, George Osborne.

Basic-rate taxpayers qualify for a £1,000 PSA. This means they can receive up to £1,000 a year in savings interest tax-free.

Higher-rate taxpayers have a £500 PSA each year.   

Additional-rate taxpayers do not receive a PSA. 

The PSA has remained at the same level since it was introduced, despite savings rates now being almost three times higher than they were then.

From the new tax year, you'll need to be 18 to open either a cash Isa or a stocks and shares Isa.

The Government says this will bring cash Isas in line with the age requirement already in place for opening Stocks and Shares, Innovative Finance and Lifetime Isas.

Anna Bowes, co-founder of website Savings Champion, says: 'This change means youngsters will miss out on putting up to £20,000 into a cash Isa at age 16 and age 17 – so effectively £40,000.

'They would be unlikely to have that kind to money themselves – so a parent may have gifted it to them. 

'But of course if that were the case, although any interest earned in the Isa would be tax free to the child, as it was gifted, the parent might need to pay tax at their own marginal rate.'

There's usually no tax to pay on children's savings accounts, including Jisas. 

If in the tax year, a child gets more than £100 in interest from money given by a parent in a savings account or Jisa, the parent will have to pay tax at their own marginal rate on all the interest if it is above their own Personal Savings Allowance. 

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