Lastweek marked the first anniversary of the Junior Isa (or Jisa) scheme the government's tax-free savings scheme for children. But, according to Stephen Womack on Thisismoney.co.uk, "fewer than half of parents know what a Jisa is", and a survey suggests that only one in 100 eligible families have used the scheme so far. The uptake is particularly low in households earning below £28,000.
The tax breaks are decent enough up to £3,600 per year can be invested in a cash or stocks and shares Jisa, or a mixture of the two, and from then on interest (in a cash account) and/or dividends and capital gains (in a stocks and shares account) are tax-free.
But there are several problems. Firstly, children with funds stuck in the previous lacklustre scheme, the Child Trust Fund, are ineligible. Next, while the average rate on Jisas is 2.81%, according to Moneyfacts.co.uk, they are not market-beating (the best standard cash Isa rate is 3.25%).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But the biggest drawback is that the money is controlled by the child, not the parent or grandparent, once they turn 18. Many parents may not want to take a gamble on their child's spending priorities, even when it's a tax-free one.
