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Junior ISAs offer efficient savings programme for generous parents

Question : I've maxed out my ISA entitlement and my wife's as well. Are there any other options for me to consider to capitalise on interest-free saving.

Claire Geddis, partner with S Hill & Co Investment Advisors, replies:

Answer: As 'saving' is the new cautious investment option of choice in these times and, if you are a parent, I would recommend that you take a look at the recently introduced Junior ISAs which will be available from November 1. This may appeal to you as parents/guardians or grand-parents who are able to help provide for a child in the future, particularly towards a university education.

Much like the adult ISAs, Junior ISAs are available in either cash or investment plans but the main difference is the amount that can be invested every year and crucially, that the money cannot be accessed until the child is 18.

The funds can only be accessed by the child, not the parent, after reaching 18.

As a parent you will be able to invest a maximum of £3,000 per year in either a cash or investment JISA where a maximum of £10,680 (tax year 2011/12) can be invested in ISAs per year. Assuming a base 3% interest rate over an 18-year term, a £1,000 per year contribution will net £25,116.87, a £2,000 per year saving will net £48,233 and the maximum contribution of £3,000 per year will yield a £72,350.60 pot.

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