Monday, 4 April 2011
A Junior ISA to Fund University Fees? (UK)
Also, recent changes to the student loans arrangements have been made - but these result in more of a student tax than a student loan.
Would it be possible to use a Junior ISAs to save for university costs?
Junior ISAs will be available from November 2011 for children under age 18 that don't already have a Child Trust Fund (CTF). Children will be able to have one cash and one 'Stocks and Shares' Junior ISA at any time, with an overall annual contribution limit of £3,000.
Funds in junior ISAs will be 'locked in' until the child is 18, and the accounts will then, by default become adult ISAs.
One of the tax benefits for parents is that it is a way around one of the awkward income tax issues - the 'parental settlement' rule. Currently, if a parent gives money for an investment in the child's name and the annual income from that is £100 (£200 for joint gifts) or greater, the parent is required to pay tax on the income. The Junior ISA would avoid this restriction.
Investor's Chronicle reports that Fidelity has calculated that someone going to university in London in 18 years' time could need over £73,000 to cover their living costs and tuition fees for three years and that to save this amount you would need to put aside nearly £210 a month (that's just over £2,500 a year) to achieve this, based on 5% growth per annum.