Many parents are failing to bond with Junior ISAs

Tax-free children's savings accounts are not attracting the cash expected as families focus on the here and now. Julian Knight reports

University tuition fees, first car, a deposit on a house. These are all massive financial hurdles for any young person to overcome. And to do it many are going to need a little help from mum and dad or even gran and granddad.

Encouraging kids to save and parents to put money aside was the big idea behind the introduction of Junior Individual Savings Accounts last November. Jisas replaced child trust funds – under which all babies born in the UK received a gift of money to save from the government – and allow up to £3,600 each year to be saved or invested tax free for the child to access when they reach 18.

As there first anniversary approaches according to the main players in the Jisa industry the numbers taking up the chance to save has been desperately disappointing: "If you look at the raw data the numbers opening Jisas are not impressive. An estimated 800,000 babies are born in the UK each year but only 72,000 Jisas are opened, according to the most recent HM Revenue & Customs figures. Many of these are in the name of older children rather than babies. This is a very slow start," says Kate Moore, the head of marketing at Family Investments, one of the country's biggest providers of Jisas and child trust funds.

A lack of support from the Government and the big banks, which have been late launching their own product ranges, seems to lie at the heart of the malaise surrounding Jisas. "There are multiple reasons; a lack of public awareness and understanding over who qualifies for them are two. In addition, parents do not want to give teenagers control of a big pot of money," says Yvonne Goodwin, the managing director of Yvonne Goodwin wealth management.

This is a point echoed by Patrick Connelly of AWD Chase de Vere who sees access at 18 as the main drawback: "This easy access puts many people off saving larger sums for fear that 'little Johnny's' education fund may be blown on fast cars and foreign holidays."

Also it seems, in hard-pressed Britain, parents are forgoing saving for their kids in favour of paying for the here and now. "I imagine that in many households saving for some point 15, 10 or even five years in the future is not a priority and I can sort of understand it.

"When I draw up a list of priorities for clients, I first look to take care of the individual and only then do I look at providing savings for the children – after all they will probably get an inheritance – as a result Jisas are low down the list of financial to dos," says Tim Stalkartt the head of financial planning at Bestinvest said.

But the relatively tiny numbers of people using Jisas compares unfavourably with the predecessor the child trust funds."About one in four child trust funds received a top up payment from families which means around 200,000 accounts a year were added too. Jisas – because they have to be actively opened by individual families, unlike CTFs, the numbers saving is far lower," Ms Moore adds.

However, Family Investments' research shows that the average amount saved in a Jisa is far higher than is the case with CTFs, fuelling fears that what has been constructed with Jisas is yet another middle-class tax break to go alongside Self Invested Personal Pensions and Stakeholder Pensions.

"Anecdotally it seems that a lot of the accounts are being opened in the names of older children – who perhaps didn't benefit from CTFs. Our impression is that it is people who have an independent financial adviser in place who are being directed towards Jisas, which is a relatively small number of probably more affluent individuals," Ms Moore adds.

But according to Mr Connelly those parents who are ignoring Jisas are missing a trick: "Jisas are considerably superior to child trust funds, because even though they don't benefit from an initial government contribution, there is a much wider and better range of investment options available."

IFAs such as Bestinvest and Hargreaves Lansdown offer access to potentially thousands of funds, while there are also a range of simple savings accounts. However, to date the overwhelming majority of investors have stuck to cash savings, with Nationwide, in particular picking up a large market share, perhaps as high as 40 per cent.

"Unless the child is near to age 18 I'd say that cash in the current market is just about the worst place to be invested. You are in effect guaranteeing that you will lose money.

"Over the longer term, investments in equities should outperform cash and have a chance of beating inflation, which in turn should help ensure that the Jisa at maturity is enough to make a real difference," Mr Stalkartt added.

Regardless of whether money should be placed in a cash account or a stockmarket fund it seems that the overwhelming challenge facing Jisas at the moment is getting people to understand what they are and open one in the first place.

With the Government committing no money to advertising Jisas and many big banks choosing to either ignore them or to not push them this is proving an uphill struggle. And this may become even tougher when rules come in banning financial advisers from accepting commission in 2013 which is already leading to many advisers leaving the industry.

"Against this backdrop, we really need the Government to take a lead in raising awareness of Jisas, after all it is their baby," Ms Moore said.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
i100

Other places that have held independence referendums
Sport
Jonas Gutierrez (r) competes with Yaya Toure (l)
football

Newcastle winger reveals he has testicular cancer - and is losing his trademark long hair as a result

PROMOTED VIDEO
Arts and Entertainment
Blossoming love: Colin Firth as Stanley and Emma Stone as Sophie, in 'Magic in the Moonlight'
film

Actors star in Woody Allen's 'Magic in the Moonlight'

News
peopleThe Times of India said actress should treat it as a 'compliment'
Arts and Entertainment
Maxine Peake plays Hamlet at Manchester's Royal Exchange
theatreReview: Maxine Peake brings emotional ferocity to Shakespeare's most starring part
News
news

Watch this commuter wage a one-man war against the Circle Line
News
We are phenomenally good at recognising faces; the study showed that humans have been selected to be unique and easily recognisable
science

Human faces unique 'because we don't recognise each other by smell'

Property
Home body: Badger stays safe indoors
lifeShould we feel guilty about keeping cats inside?
News
A male driver reverses his Vauxhall Astra from a tow truck
news

Man's attempt to avoid being impounded heavily criticised

Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Student
The Guildhall School of Music and Drama is to offer a BA degree in Performance and Creative Enterprise
student

Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Recruitment Consultant - Soho - IT, Pharma, Public Sector

    £20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Payroll & Accounts Assistant

    £20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week