From Tuesday 1 November 2011 The Children’s ISA started offering parents a range of brand new options to help them save for their children’s futures.
While a parent has to open one, anyone can pay into The Children’s ISA (up to £3600 per tax year) and only the child, when they reach 18 will be able to access the funds, which could be as much as £108,000 (based on the assumption that £3,600 is paid in each year from birth to age 18 and there are no changes to the taxation of junior ISAs and growth of 5% net per annum).
The Children’s ISA is offering low cost, actively managed, ethical and shariah funds and a Children’s ISA can be opened with a minimum investment of £10.
David Dawson, savings director, The Children’s ISA said: “The Children’s ISA is a simple and flexible junior ISA with the backing of some of the largest asset managers in UK including Total Clarity Funds, Prudential, Ecclesiastical and Scottish Widows.
“You can pay in up to £3600 per tax year in our Children’s ISA and calculations show that a parent who saves the full allowance each year could achieve a pot of almost £108,000 by the time the child is 18 (based on growth of 5% net per annum, see above).”
The Low Cost option for The Children’s ISA is being provided by TCF Investment’s Total Clarity Funds. They provide investors with low cost, well diversified and risk graded investments. They hold a wide variety of index funds, each of which invests in several companies and bonds to try to protect against the risk of loss from failing companies.
David Norman, joint founder and CEO of TCF said: “TCF Investment is delighted to be supporting The Children’s ISA, it’s a better deal for the next generation. Our tips for investment are: Don’t put all your eggs in one asset class basket; if you are a long term investor don’t put all your eggs in cash; Keep costs low.
“The combination of a smart tax wrapper and low cost, diversified fund management is a great way to save for your children’s future.”
The actively managed fund is being provided by Prudential, one of the UK’s largest asset managers. The actively managed investments are where the manager makes specific investments with the goal of outperforming an investment benchmark index. The fund will work within people’s tolerance to risk to potentially deliver higher returns.
Manish Pabari, Director of Derivatives, Prudential Portfolio Management said: “Prudential is pleased The Children’s ISA has selected our actively managed investments. It is important that parents consider all the options available to them when choosing how to save for their children’s future.”
The Children’s ISA has selected Ecclesiastical Investment Management (EIM) to provide its ethical product. EIM has been at the forefront of socially responsible investing since 1988 and has £1.9 billion (at March 2011) currently under management.
Phil Baker, Business Development Manager, Ecclesiastical said: “Ecclesiastical are delighted that the Amity International Fund has been selected as the Children’s ISA’s ethical investment option. Investing for children is an important part of any family’s financial plans, be it to help with education fees, first homes or just to get children off to a good start in life.
“The Ecclesiastical Amity International Fund provides access to global equity markets, which traditionally outperform cash over the longer term. Our Amity process means we avoid companies that are engaged in negative activities, such as alcohol and tobacco production. We then focus on investing in companies that are doing the right things, managing their companies well and responsibly whilst giving proper consideration to the environment and the communities they operate in.
“Our overall aim is to deliver our investors ‘Profit with Principles’. Investing in the Amity International Fund with the Children’s ISA gives families the opportunity to access the potential long term growth of global equity markets with the comfort their money is invested in a responsible way.”
Backed by Scottish Widows Investment Partnerships (SWIP), the Children’s ISA Shariah model means investments are made under strict Shariah Law and Islamic investment guidelines meaning Muslims can take advantage of the Children’s ISA.
The Shariah model invests in companies on the Dow Jones Islamic Stock Index and investments are also screened through The Shariah Advisory Board, ensuring they meet the strictest ethical investment principles.
Craig Bonthron, Investment Manager, International Equities, SWIP said: “SWIP is delighted to work in conjunction with The Children’s ISA. We have a history of tailoring our investment offering to suit varying client needs and we are pleased to be able to support this savings initiative within a Shariah-compliant environment. “
The Children’s ISA, set up by David Dawson and Mark Albinson from Manchester, is a junior ISA. The junior ISA was announced by government as the replacement for the Child Trust Fund (CTF).
Here’s the latest information about junior ISAs:
• Up to £3600 can be invested each tax year into the junior ISA products which will be indexed by Consumer Price Index (CPI) from 6 April 2013 onwards.
• Each child is limited to one cash ISA and stocks and shares ISA.
• Any parent or guardian can open it and anyone can make contributions to it. Management passes to the child when they reach 16 but they can only access fund when they turn 18 when it becomes an adult ISA.
• There is no government contribution to the Children’s ISA.
• Any UK resident child under 18, who is not eligible for a Child Trust Fund (CTF), is eligible for a Children’s ISA. This includes children who were born before the CTF eligibility in September 2002.
• A child born between September1, 2002 and January 2, 2011 was eligible for the CTF, at this time, if a child has a CTF they cannot have a Junior ISA.
Applications can be submitted online or by post. The Children’s ISA is operated by Avalon Investment Services who administer £300m invested primarily through Independent Financial Advisers.