Alternatives to Junior ISAs – keep control of your child’s nest egg

Thursday, November 21, 2013

Junior ISAs, launched two years ago to replace the much maligned Child Trust Fund, have not proven to be hugely popular.  Neil Armitage, Marketing Director at Foresters Friendly Society highlights some alternatives available to parents and grandparents who are keen to save for their children's futures.

Foresters regards long term savings as an essential element of financial awareness and responsibility and, whilst Junior ISAs have a place in that they encourage saving for a child's future, there are many parents who are nervous about their children having access to a lump sum at age 18. This is one of the main reasons behind the poor uptake of JISAs. But what are the alternatives to those who want to save for their children?

Foresters offers a range of children's savings plans which could meet your requirements if you are looking for tax free savings, are considering a savings account for your child or would like to start investing for your grandchild.  With houses to buy and university to pay for, it is important to start saving as early as possible. The long-term nature of Foresters child savings plans provides savers with the opportunity to build, and potentially grow, a nest egg for their offspring.  What better way to help your child or grandchild in the future when they need it most.

Child Tax Exempt Saving Plan (CTESP) is a long-term regular savings plan available to all UK children, whether or not they have a Child Trust Fund (CTF) or Junior ISA.  Such Plans can only be offered by a Friendly Society.  You can save from £15 to £25 a month and choose how long you want to save for (between 10 and 25 years).  The plan can mature any time after a child's 16th birthday, subject to a minimum term of 10 years.  The child will receive a cash lump sum when the plan matures which is guaranteed to be at least what you have paid in provided you have maintained your monthly contributions for the full term for this guarantee to apply.  Although not guaranteed, there is also the potential for a higher return dependent on the investment conditions throughout the plan's duration.

Ethical Child Savings Plan* (ECSP) is another way to invest tax free to help towards your child or grandchild's future financial needs.  It can help you to give your baby, child or grandchild a head start in life through an ethical investment providing them with a cash lump sum when they need it most.  As with the CTESP, this is a long-term regular savings plan available to all UK children whether or not they have a CTF or Junior ISA.  And, again like the CTESP, you can choose how much you want to pay into the plan (£15-25 a month) and how long you want to save for (10-25 years). The ECSP is invested for the potential for a higher rate of return over the longer term, compared to the CTESP above, however this is not guaranteed and means your child may not get back what has been paid depending upon how the investment performs over the term of the plan.

Member benefits** - When you take out a child savings plan, your child will become a Foresters member.  As such, they will qualify for Foresters Extras, a range of benefits offered at no extra cost. These include access to a GP consultation line and discretionary  discretionary grants, including Educational Awards to assist with the costs of higher education or training.

Please note:  As of 1 January 2017 the GP Consultation Service is no longer available.

*Foresters Friendly Society aims not to invest in any company believed to be harmful to people, animals or the environment and automatically rules out businesses involved in arms manufacture, tobacco, pornography, animal testing or gambling.

** Our membership benefits are not regulated and are regularly reviewed by us to ensure they are relevant to our members.

Please remember that inflation will reduce the spending power of the money your child gets back in the future. Tax rules may change in the future and will depend on individual circumstances.