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Junior ISA and Premium Bond birthdays - 1st November

There are two noticeable birthdays coming up on the 1st November. The Junior ISA turns 5 while Premium Bonds celebrate their 60th birthday.

Premium bonds

Conventional wisdom suggests that premiums bonds work best for higher rate taxpayers who already use their ISA allowance and want a secure home for a proportion of their cash, while the increased investment limit of £50,000 appeals to wealthier investors.

Premium bonds have actually become more attractive in many cases since interest rates have fallen. Despite the prize pool also falling and now sitting at 1.25%, when compared to savings accounts paying zero interest, the chance of winning a return in prizes is actually an appealing prospect.

Danny Cox, Chartered Financial Planner, Hargreaves Lansdown:

"Premium bonds are a national treasure. More people hold premium bonds than save into cash ISA. With cash returns are so poor, the potential for a tax free prize compared to meagre or zero interest is more attractive – if your cash is paying nothing, at least with premium bonds you could win something. The absolute security premium bonds provide is of key importance to savers and investors alike and as a birth day gift, premium bonds provide over 210 monthly opportunities to win a prize over the course of a childhood."

Junior ISA

As the Junior ISA heads for its 5th anniversary, momentum is building nicely with 738,000 Junior ISA accounts subscribed to in the 2015/16 tax year, a 44% increase on the previous year. £921 million was invested in 2015/16, up 58% from the previous year, of which around 60% was in cash.

Over 90% of maturing HL Junior ISA accounts continue to be invested and are not cashed in, showing that young adults can be trusted to be responsible with capital sums.

Danny Cox, Chartered Financial Planner, Hargreaves Lansdown:

"Parents and grandparents are looking ahead and using savings and investment products such as Junior ISA and premium bonds to help soften the impact of the higher education debt mountain on their children and grandchildren after university. It’s encouraging to see the vast majority of people retaining their ISA savings from age 18 showing that people can be trusted with money at a relatively young age.

Transfers from Child Trust Funds (CTFs) to Junior ISA have also been available since April 2015. However over 900,000 CTFs are thought to be “gone-away” where the provider does not have the correct contact details for the child or their parent. Parents with children born on or between 1 September 2002 and 2 January 2011 should check which CTF has their child’s money via HMRC and then make sure it is working hard for them."

Key difference to set up and access

For parents and grandparents considering investment for new children or grandchildren, there are some key difference between Junior ISAs and premium bonds in terms of set up and maturity. Grandparents cannot set up a Junior ISA for their grandchildren (unless they are the registered contact) but can add money once the JISA has been established. In contrast grandparents can set up premium bonds.

Feature Cash Junior ISA Stocks and Shares Junior ISA Premium Bonds
Age eligibility Birth to age 18 Birth to age 18 Birth to age 16
Parent, legal guardian set up Yes Yes Yes
Grandparent set up No No Yes
Minimum investment (typical) £1 £25 per month £100
Contribution limits £4,080 p.a. £4,080 p.a. £50,000 total
Tax-free returns Yes Yes Yes
Type of return Interest Potential for growth and reinvested dividends Potential for prizes
Security FSCS to £75,000 FSCS to £50,000 100%


Globelynx and ISDN ready

Hargreaves Lansdown is equipped with a live in-house broadcast camera via the Globelynx network and has an ISDN line available for radio interviews - 0117 934 9006. To arrange an interview with a Hargreaves Lansdown spokesperson please contact the person you wish to speak to directly using the contact details above, or call Globelynx on 0207 963 7060 or email globelynx@globelynx.com.