Latest news with #Jisa
Telegraph
03-05-2025
- Business
- Telegraph
Britain's richest children already have six-figure savings
Hundreds of children already have six-figure sums in savings accounts, new data shows. Parents can stash up to £9,000 a year into Junior Individual Savings Accounts (Jisas), which can be invested in stocks and shares or cash. More than two million children have up to £25,000 saved in a Jisa, according to figures obtained via a Freedom of Information request lodged by savings company Standard Life. Around 2,400 are sitting on £75,000 to £100,000. The average Jisa has a value of £4,370; however, figures reveal there are 400 children with nest eggs worth more than £100,000. Jisa returns are tax-free, and the accounts are available to anyone in the UK under the age of 18. Introduced in 2011 as a replacement for child trust funds, they are designed to encourage long-term saving by locking away cash until the child reaches adulthood. The accounts have become more popular among parents looking to pay their children's future university tuition fees, or to help them save towards a house deposit. Investment experts are now calling on families to consider putting some money into child pensions. Though more niche, child pensions have also emerged as a tax-efficient way to save for adulthood. They are government-backed savings accounts similar to Lifetime Isas, rewarding savers with a 20pc top-up. Mike Ambery, of Standard Life, said: 'Jisas and child pensions are both great ways for families to save for their children's future. 'Jisas provide a tax-efficient way to save for adulthood, while children's pensions are great for those playing the long game as they will benefit from decades of compound investment growth.' Assuming a parent paid the maximum £2,800 into a child pension every year, a child could have a pension pot of £75,200 by the time they entered the workforce, Standard Life said. Child pension savings cannot be accessed until retirement age, however. Mr Ambery said: 'As children gain access to their Jisa funds at 18, it's important for parents to ensure their children understand the value of saving and making informed financial decisions before committing a vast amount of cash. 'Prioritising financial education from an early age can help young people manage these funds wisely when the time comes. 'For those wanting to take a longer-term approach, a child pension offers a structured way to build wealth over time, potentially more than doubling the eventual value of the child's workplace pension pot.'
The Independent
27-03-2025
- Business
- The Independent
Five-point checklist all savers should do before the end of the financial year
As the end of the tax year nears, now is the perfect time to take stock of your finances and ensure you are in a good position for the next financial cycle. From 5 April, several key fiscal changes with come in for people of all income levels. Some of the early measures announced by chancellor Rachel Reeves at her October Budget will come in force, including an increase capital gains tax and stamp duty. At the same time, tax allowances will be reset across the board. This means the end of March marks a final chance for savers to ensure that they have maximised the their potential for tax-free savings in the year. The UK's economic outlook heading into the new financial year is a mixed picture, with inflation steadily rising at the end of 2024 and in January before dropping to 2.8 per cent in February. These challenging financial conditions have led many consumers have to begin holding on to more of their cash as stubbornly high prices remain in place. Against this uncertain economic backdrop, savers will want to be doing everything they can to ensure they are bolstering their finances against any more unwelcome turns. Here's everything you might want to check off before the new tax year begins on 5 April. Review your Isa allowances A crucial first step is to check that you've fully utilised your Individual Savings Account (Isa) allowance for the year. Every taxpayer is able to add up to £20,000 per year across all their Isas and pay no tax on the growth or income received on it. Because this allowance can be spread, a saver could add £10,000 to a Stocks and Shares Isa and another £10,000 to a Cash Isa in one financial year. For anyone planning to add more funds to any of their Isas, there is no time to lose. There is no downside to maximising the allowance if you're able to, so it's wise to do this rather than sit on cash that is accruing no interest or dividends - the Isa allowance is a use it or lose it scenario. Don't forget the Junior ISA For those with kids, there is another tax-free allowance you might want to be aware of. This applies to the Junior Isa (Jisa), an account specifically for children that has a lower annual limit than other Isas. Get a free fractional share worth up to £100. Capital at risk. Terms and conditions apply. This allows parents to deposit £9,000 a year on behalf of each of their children. They cannot access these funds until they are 18, but can have control of the account from 16. As with a normal adult Isa, it is wise to maximise the allowance on a Jisa to ensure the most tax-free returns are being seen. Any parent who has maximised their own allowance and wants to invest further might consider this option. Planning on buying a house? Look at the Lifetime Isa Another opportunity for massive returns, the Lifetime Isa (Lisa) is a unique savings account that offers a massive 'interest rate'. This is the government-backed scheme that will see any deposit matched by a 25 per cent boost, but with one key catch: the money must be spent on buying a first property. Up to £4,000 a year can be deposited in a Lisa, which will be matched by up to £1,000 by the government. This level of increase on savings is unmatched by any other Isa or savings account you can get, but its limited purpose means it is not a viable option for everyone. But for those who are looking to secure a first home in the next few years (which must be under £450,000 as per the rules of the scheme) investing in a Lisa is a very good idea. It's also worth noting that Lisa deposits count towards your annual £20,000 Isa limit. Utilising your pension can be another wise way to find tax-efficient savings. Personal contributions made into pensions receive tax relief from the government, meaning there are savings to be made through long-term investment. This means the government automatically gives back tax you would have paid as an additional deposit into your pension pot. For instance, for someone on the basic income tax rate of 20 per cent, an £80 deposit will be boosted to £100. Those on higher rates can also claim additional relief to reclaim the right amount of tax back. Those nearer retirement age might want to prioritise this approach as they will reap the rewards sooner. However, it is never too early to begin boosting your pension, so for younger savers who have the funds to diversify, this could be a good option for them too. Funds held within a pension also benefit from tax-free growth over time so any money invested in them will grow more quickly than if invested straight from income. This means anyone who is planning to make extra contributions to their pension pot will never suffer from investing as early as they can. Have you maximised your state pension? Unlike most other items to check off for the new financial year, this one is a last-chance situation. Most people under 73 have until 5 April to boost their state pension amounts for retirement in just a few straightforward steps. This is the deadline to effectively buy back any missing national insurance years from 2006 to 2018 – a crucial element in securing the most out of the state pension. After this, you can only fill in the gaps from the previous six years. People of all income levels are advised to check they are not missing out, as the state pension is paid to all qualifying pensioners equally. To pay for national insurance years or seek further guidance, savers can visit the HMRC website. When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
Telegraph
12-03-2025
- Business
- Telegraph
How to pay for your child's university for £80 a month
Many parents dream of seeing their child graduate from university. Sitting proudly in the audience, waiting for their son or daughter's turn on stage, and then watching them pick up a hard-earned degree is a moment they will savour for life. But over the years, higher education has become very expensive – and it's still rising. Fees will hit £9,535 from the start of this academic year, a 3.1pc rise and the first since 2017. When living costs like rent, bills and groceries are added for students living away from home, the cost of going to university for three years can hit nearly £57,000, according to advisors Brewin Dolphin. Parents need to be savvy and forward-thinking to ensure they are ready to support their children's education. New research shows that those starting early, and setting aside money each month using a Junior Isa (Jisa), might be able to grow the pot to send a child to university – and more. Jisas were introduced in 2011 to replace child trust funds, and they're available for children under 18 who live in the UK. They're tax-free and you can pay in up to £9,000 a year. The child can take over the account when they turn 16, but the money can't be withdrawn until they turn 18, as they're designed to be long-term savings accounts. Investment manager, Vanguard, has calculated that saving £80 a month into a Jisa from birth until a child turns 18 would generate just over £30,000 – enough to pay for three years of tuition fees. For those who can save a little more, £175 a month would cover their tuition fees and living costs of £1,000 a month for the same period, with the pot reaching almost £67,000. And those who put away the full Jisa contribution allowance of £9,000 each year could hand their child a pot of £300,000 on their 18th birthday. Each scenario assumes an annual return of 6pc. As it's in a Jisa, everything is shielded from capital gains and income tax. James Norton, of Vanguard, said: 'Our calculations demonstrate the benefits of investing little and often to save for a child's future. Jisas are great vehicles to invest in as there is no tax or profits made. The money is locked away until the child reaches 18, at which point they can withdraw the money or leave it invested in a stocks and shares Isa for example.' There are two types of Jisa: cash, or stocks and shares. With cash Jisas, you will receive interest at a set rate. In stocks and shares Jisa, you make investments and keep any profits. A child can have either type of account, or one of each. You can still only deposit £9,000 each year across both. There are pros and cons to both. A cash Jisa is risk-free, but a stocks and shares Jisa could generate better returns – although it can also go down if your investments don't perform. Mr Norton added: 'There are a few considerations to think about with stocks and shares Jisas. Firstly, the parent or guardian should think about the timeframe of the investment. If it's 18 years, with the purpose of funding further education, for example, a significant amount of risk could be taken to maximise the opportunity to grow wealth in the early years. 'However, as the child's 18th birthday approaches, it would be sensible to start reducing the risk to ensure large losses aren't made just as they need to withdraw the money. 'It's also important to think about the spread of investments within the Jisa. A wide spread covering the main stock markets is a smart way of ensuring you hold outperforming stocks, improving your chances of growing your child's nest egg.' 'Having that money felt precious to me' Freya Taylor-Lester, 21, was born before Jisas were available, but she received a child trust fund. The Government made the first contribution and her mum helped build it up to £5,000. She says this instilled the savings habit and enabled her both to travel and pursue her dream of becoming an actress by helping to pay her tuition fees at Arts Educational in Chiswick. She said: 'My mum put money into the account every month. Over the years, it built up quite a bit and when I turned 18, I got access to it. 'I wanted to go to drama school. I used part of the money to fund my course because it's quite expensive. Very, very expensive in fact. It's quite insane how much drama schools cost to attend. 'I was working and kept adding to it. I did a couple of acting jobs and also worked the weekends and I would add all the money into that account. 'Obviously, I felt very lucky that I had that amount to start me off. Having that felt very precious to me and it helped me save for the next few years. It was like I wanted to keep that up, I didn't want to just spend it and it be gone.' The pot also enabled her to take a trip to New York City with her course mates. She said: 'This was the first time I went anywhere without my family. It just felt like being an adult for the first time and like the world was at your fingertips.' Since the government replaced child trust funds, Jisas have become popular. According to research from financial services provider OneFamily, a third of parents aged below 50 have opened a cash Jisa for their child and almost one in five have opened a stocks and shares Jisa. Asked what they'd like their child to use their Jisa for, around a third said saving for a house and the same proportion said putting it towards the costs of university. Jim Islam, of OneFamily, said: 'The power of long-term savings coupled with the importance of starting early can make a big difference to a young person's life. By investing over an 18-year period, even relatively small sums can have a huge impact by the time a young person enters adulthood. 'Savings accounts like Jisas and child trust funds offer a vital boost at a crucial time in their lives. Whether that's going into higher education, buying a car or putting it towards a property, these nest eggs can support a young person when they turn 18 and help the next generation build a bright future.'
