The launch of Junior ISA is imminent on November 1st but the leading Child Trust Fund provider discovered that awareness remains worryingly low. Twelve months ago, 91 per cent of parents with children aged under-eighteen had not heard of Junior ISA but today 73 per cent of parents are still unaware of the tax efficient product.
Kate Moore, Head of Savings and Investments at Family Investments said: “Based on our experience with Child Trust Funds parents contribute an average of £27 a month to the accounts. Applying these figures to Junior ISA, newborn children could miss out on up to £165m within the first year of the new scheme alone**. In many ways this is just the tip of the iceberg as the Junior ISA is open to any child aged under eighteen who does not have a CTF.”
Despite the low awareness levels, 78 per cent of parents believe that saving for their children is important and when Junior ISA was explained, 59 per cent said they thought it sounded attractive.
The majority of parents (68 per cent) are looking to the Government to offer information on the product, while many others are looking for a steer from parenting groups (29 per cent). A significant majority (73 per cent) of parents said they did not think enough information had been made available to the public.
Kate Moore continues: “Awareness is clearly an issue for Junior ISA but we have a second concern regarding affordability. Our research also found that the average parent hopes to save an around £41.35 a month for their child over the next twelve months. This is great news, but our experience with Child Trust Fund suggests this may be optimistic. We are concerned that many of the investment-based Junior ISA accounts will only be offered with a minimum premium of £50 per month as providers try to attract the most wealthy customers, leaving ordinary parents with too few options.
“With household finances being increasingly squeezed over the next few years, our concern is that parents will have no choice but to drift into a cash account as one the few affordable options, and in a low-interest rate/high inflation environment this could mean that many parents are losing money in real terms.
“With affordability such a critical factor, it is for this reason that we have chosen to offer a Junior ISA with a low minimum premium of just £10 a month. The Family Investments product will offer access to a stock market-based investment, which we believe provides the best potential for growth over the long-term.
An investment Junior ISA invested in a balanced fund
Low monthly premiums starting at just £10
Parents can manage their Junior ISA account online which allows them to download a statement, manage contributions and check investment performance
Family Investments Child Trust Fund customers, who also open a Junior ISA account for another child, can manage both accounts online with the same login
An ethical version will also be available
Recap of the key research findings:
73 per cent of parents with children under 18 are currently unaware of Junior ISA
78 per cent of parents feel it is important to save for their children
Parents hope to save £41.35 a month for their child over the next year
Once explained, 59 per cent believe the Junior ISA sounds like an attractive savings product
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The Junior ISA is a new and affordable way for you to save and invest on behalf of your child. If your child is under the age of 16 and did not qualify for a Child Trust Fund, you can invest from as little as £10 a month.