Investment - Articles - AIC comments on Junior ISA regulations

 The Association of Investment Companies (AIC) today welcomed confirmation of the final rules for Junior ISAs which promise to create a simple and tax efficient way to save for children.

 The increase in the annual contribution limit from £3,000 to £3,600 is particularly positive, as is the decision to allow providers flexibility to decide what type of product they want to offer.  The old Child Trust Fund rules forced providers to offer a ‘cash' version which made CTFs less attractive to those wanting to offer equity-based products.  These measures should encourage more providers to enter the market which in the long term will deliver opportunities for lower cost, better performing investment.

 Ian Sayers, Director General, Association of Investment Companies (AIC) said: "Junior ISAs offer a straightforward way to save for children tax efficiently.  The use of the well-established ‘ISA' brand should help build confidence and familiarity with the product.

 "The Junior ISA will create even stronger incentives for those committed to saving for their children.  An annual investment of £3,600 into the average investment company over the last 18 years would have grown to £147,541 which would be an impressive nest egg, whilst £50 per month into the average investment company over the same time frame would have also grown into a substantial £23,645.  What will be important will be encouraging more parents to devote what they can to building a nest egg for their children's future.  Ideally Junior ISAs should be linked to financial education in the classroom, and this is particularly appropriate given that children will be able to manage their accounts from age 16.  Financial education would help foster a savings culture and teach children that regular saving, even with more modest sums, can make a real difference over the longer term. 

 "Investment companies are an ideal way to save for children.  With strong long-term performance, the freedom to gear to enhance returns, and a closed ended structure to help managers take a long-term view of the market, investment companies are an ideal way to access the long-term potential of the stock market.  They cover a diverse range of sectors and benefit from an independent Board of directors to oversee shareholder interests."

 Share price total return on £3,600 per year over 18 years (to 30 June 2011)

 Share price total return on £300 per month over 18 years (to 30 June 2011)

 Share price total return on £50 per month over 18 years (to 30 June 2011)