New Junior Cash ISA From Lloyds TSB

Lloyds TSB is set to launch a Junior Cash ISA, a long term savings product, from 13 February 2012.

The Lloyds TSB Junior Cash ISA will be offered at a tax free flat interest rate of 3% AER. The minimum opening balance is £1 and the maximum is the ISA allowance, currently set at £3,600.

The Junior ISA replaces the Child Trust Fund and this type of savings account currently is only available to children not eligible for a CTF i.e. those not born between 1 January 2002 and 3 January 2011.

The Junior ISA enables a tax free savings pot to be built up for a child and when the child reaches 18 it will mature into an Adult Cash ISA, where they can continue to save without paying tax on their existing balance.

Deposits can be made by anyone, subject to the annual ISA limits and are treated as a gift to the child and cannot be returned to the donor. No withdrawals can be made until the child reaches 18, except in the exceptional circumstance of the child’s death or terminal illness.

Those looking to make the most of the annual limits have until 5th April 2012 to invest for this tax year.

The Lloyds TSB Family Savings Report indicates that children in the UK are increasingly reliant on parents for financial support. In fact 80% of young adults in the UK now receive some form of financial support from their parents, compared with 61% during the 1980s.

As Greg Coughlan, head of savings for Lloyds TSB comments: “The Junior ISA allows parents to set aside money throughout their child’s life in a tax efficient way, building that all important nest egg which could either help fund their university education or help them take that first step on the property ladder.”

MoneyHighStreet comments: ‘Getting into the habit of saving even a little each month can really add up and in the case of putting this money into a savings account for a child can really set the child up for later life.

Lloyds TSB is the first of the major high street banks to announce a Junior ISA account, it will be interesting to now see how the others respond.

“One issue of concern though is that for those eligible for a CTF, a Junior ISA is currently not accessible. This seems totally unreasonable – it is vital that all parents can maximise their savings into competitve accounts and have an easy to understand, consistent set of accounts to compare and understand what offers them the best deal.

“Surely those with a CTF should have the option to open a Junior ISA? Perhaps the condition is that any money saved into a Junior ISA has to be transferred across to the new account?

“The Government has indicated that once Junior ISAs are up and running they will explore this issue. In our opinion, the sooner they do this the better.”

“If you feel strongly there is an e-petition you can sign on the Government website ‘Merge Child trust Funds with Junior ISA’s‘. This needs 100,000 signatures to get the issue debated at the House of Commons.

“Finally, just to pick up on savings accounts generally. Do make sure you regularly check that you are getting the best interest rate you can. If you’re not, take the time to move the account to get a better deal.”