Make a difference to your child s future with our Junior ISA

Transcription

1 Make a difference to your child s future with our Junior ISA

2 Our Junior ISA at a glance A long-term savings and investment account that belongs to the child. Available to all children born after 2 January 2011 and under 16s born before 1 September All investment growth and returns will be free from personal tax. Two types of Junior ISA are available, a cash deposit and stocks & shares and each child can hold one of each. We do not offer a cash Junior ISA. You, your family and friends can invest up to a total of 4,000 together in each tax year. The child can only withdraw their money when they reach the age of 18. The Junior ISA will automatically roll over into an adult ISA on your child s 18th birthday, if the money is not withdrawn. Investment in The Children s Mutual Junior ISA is linked to stocks and shares as we believe that, over longer terms (5 years or more), the potential for growth is greater than with a cash-based account. Apply online for our Junior ISA in less than 10 minutes thechildrensmutual.co.uk/juniorisa 2

3 Make their 18th birthday one to remember Imagine the look on your child s face when they turn 18 and you tell them that there is a lump sum of money just for them waiting to be put to good use. Whether they are going to university, planning to buy a home, want to buy a car or travel the world, it could help bring their hopes and dreams one step closer to reality. Saving from now until they re 18 really could make all the difference to your child s future. That s what makes the Junior ISA such a good idea it s all about planning ahead and giving your child a helping hand as they start out on their adult life. Why should I start a Junior ISA for my child? The cost of living isn t getting any cheaper. The average student debt is currently 59,100 1 and with tuition fees set to rise this will increase. The average deposit on a property for a first time buyer is 33,148 2 and buying a typical second-hand car could cost 2, It s hard to know what things will cost when your child reaches 18, but with inflation it s highly likely that costs will be much greater in future years. And as it s your child s future that we re talking about, planning ahead and putting money aside now will help to provide the assistance they ll need. Experience shows that investment linked to shares has generally produced better returns than cash deposit accounts over longer periods, although of course we can t guarantee that this will continue in the future. Nevertheless, we believe that our Junior ISA has the potential to build up a healthy lump sum for your child at 18 especially if regular contributions are made over as long a period as possible. And if you have other children who were eligible for a Child Trust Fund, research has shown us that parents are keen for a similar plan for their older or younger children as a matter of fairness. The Junior ISA gives you that option as it s been designed to offer very similar benefits. Sources: 1. Average student debt currently: 59,100 (The Push Student Debt Survey (2011) is the most detailed annual analysis of students financial position, often used by the Government and other institutions as the authoritative research. This is based on students starting in 2012, in England where tuition fees will be rising to an estimated average of 8,630 the average debt on graduation will reach 59,100 (July 2012)) 2. Average deposit on a property for a first time buyer is: 33,148 (House price index from indicates the price of a typical UK home is now 165,738 (June 2012)) 3. Typical second-hand car cost: 2,499 ( A typical 7-year old second hand car e.g. Vauxhall Corsa 1.2i 16V Design (July 2012) cost 2,499) Imagine when you tell them driving lessons could be sorted 3

4 How does our Junior ISA work? The Children s Mutual Junior ISA invests in the Foundation Growth Fund which is managed by Aberdeen Asset Management (Aberdeen). Aberdeen are one of Europe s largest asset management companies. As at 31 August 2014, they managed funds worth over 331 billion. The Foundation Growth Fund aims to achieve long-term growth by tracking the FTSE* All-Share Index. What s more, over half a million of our Child Trust Fund customers already invest in the fund. Yearly administration charge is 1.5% of the accounts value. For further details please see the Key Features, which can be found on our website. As with any investment linked to company shares, the value of our Junior ISA is not guaranteed, and will move up and down over time. That s why it invests in a fund that aims to match the performance of the widest range of UK company shares, rather than just a When thinking about this, remember that a Junior ISA can be rolled over into an adult stocks and shares ISA once the child reaches 18. So, if you are investing for a 15 year ISA between the ages of 18 and 21. For this reason we will not open a Junior ISA for an eligible child who is already aged 16 or over. * FTSE is a trade mark of the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited ( FTSE ) under licence. All-Share is a trade mark of FTSE. What about tax? any growth in the value of your child s account. However, the fund may have paid tax on dividends earned by the shares it holds, and this can t be reclaimed. If your child is still living in the UK when their Junior ISA ends on their 18th birthday, they won t have to pay tax on its value at that time. It is, of course, possible that this may change in the future. If UK tax laws change, we will let you know how it will affect your child s Junior ISA. Taxation will depend on personal circumstances. Imagine his face when you can say okay to a gap year 4

5 What happens when my child s account is opened? We ll open your child s Junior ISA account as soon as we receive your application. You ll have a short period in which you can change your mind, but after that we can t return any money because it belongs to your child. You can find more information about this in the Key Features. The person opening the account must be someone with parental responsibility for the child until they reach 16 and will be called the Registered Contact; we can only discuss the account with this person. We ll send statements twice a year to the Registered Contact showing what the Junior ISA is worth at that time. The Junior ISA is a great opportunity for your child to learn about the value of saving. By looking at the statements together, you ll be able to help your child start to understand the basics of investing and putting money aside for the future. Hopefully, this will encourage them to develop a sensible approach to money and the need to plan for what they want. Once your child reaches their 16th birthday they can choose to become the Registered Contact and manage their own account, but they will not be able to withdraw any money until their 18th birthday. If they don t take on the role when or after they reach 16, the existing Registered Contact at that time will continue to manage the Junior ISA on their behalf until they turn 18. Why make contributions? The more you put into your child s Junior ISA, the more it is likely to be worth when they reach 18. It could make so much difference to their adult life, helping them to achieve the things they want and reducing the amount of money they may need to borrow to be able to do so. So that s why we encourage you to tell your friends and family about your child s Junior ISA. They can all contribute too why not ask them to do that instead of buying presents at Christmas or on your child s birthday? Their contributions will help to build up the account and will be a meaningful way of showing that they care. And the choice of monthly or one-off lump sums means it s really easy to contribute. Imagine her face when you tell her how easy saving for her future was 5

6 What could my child s Junior ISA be worth? Amount paid in each month We ve used 17 years as our example period because the money can t be taken out until your child s 18th birthday. These figures assume growth of 5% each year and total charges of 1.5% of the account s value each year. They are only examples and are not guaranteed. Your child could get back more or less than this, and could get back less than has been paid in. Don t forget that inflation would reduce what you could buy in the future with the amounts shown. At the time of preparing this brochure, we believe this rate of growth should be achievable over 17 years, although it is less likely to be so over shorter investment periods. The possible value of the Junior ISA when your child reaches 18 will depend on a number of things, including how much has been paid in, the price of shares when each contribution was paid in and when they are cashed-in, the effect of charges (more on this in the Key Features), and how well share values have grown. This means we can t give you a specific future value. How do the charges work? Total amount paid in Possible value of Junior ISA in 17 years time based on 5% growth each year 20 4,080 5, ,200 13, ,400 27, ,932 91,900 Our charges are 1.5% of the value of the Junior ISA each year. So, for example, if the value was 500 throughout a year, we would charge 7.50 for that year. If it was 1,000 throughout a year, our charge for that year would be 15. Charges are allowed for in the price of units in the fund we do not deduct them separately. The Fund manager s charges are shown in the Key Investor Information Document (KIID), and represent the maximum charges that we could pay to the Fund manager. To the extent that some or all of these charges are relevant to your investment in the Fund through our Junior ISA, they are included in our own charges (as above), and not charged separately to the Junior ISA. The effect of charges that you pay to us is to reduce the potential value of the Junior ISA from what it could be if there were no such charges. Although the growth in value is likely to be greater than the effect of the charges, this is not guaranteed, and the child could get back less than has been paid in, particularly if the plan is held for only a short time. The table below shows how the charges would affect a Junior ISA account over 17 years, based on an assumed growth rate of 5% a year which, at the time of producing this document, we believe to be achievable over 17 years. The figure is the maximum value for middle rate projections allowed by the Financial Conduct Authority (FCA), but it is not guaranteed the Junior ISA could grow at a lower or higher rate than this. The figures in the column headed What the value of the Junior ISA might be show what could be available at the end of each year if, say, you wanted to transfer to a different ISA manager. The figures for year 17, however, show the possible amount the child could get back if the assumed growth rate were achieved and our charges had remained constant. Effect of deductions for charges regular payments of 20 a month for 17 years At end of year Investment to date Effect of deductions to date What the value of the Junior ISA might be , , , , , , , ,520 The last line of the table above shows the effect of the total charges and expenses over 17 years. Putting it another way, this would have the effect of bringing investment growth from 5.0% a year down to 3.4% a year. This information about the reduction in investment growth can be used to compare the effect of charges with similar products. 6

7 How can I add to my child s Junior ISA? The most that can be paid in is 4,000 (between all contributors) in each tax year (6th April to 5th April); this can be split between the two types of Junior ISA. This limit increases yearly by reference to the Consumer Price Index (CPI). To open a Junior ISA with us, you ll need to set-up a Direct Debit of 20 or more a month, or make an initial payment of 250. Once your child s Junior ISA is up and running any future one-off payments can be 50 or more. Lump sum payments can be made by Direct Credit, cheque, or Debit Card over the phone. Of course, you can make both regular and lump sum payments if you wish. Anyone can pay into your child s Junior ISA, so you, your family and friends can all contribute towards providing them with a very useful amount when, or after, they reach 18 (money cannot be withdrawn before then). Please note that money paid into the Junior ISA automatically belongs to your child, so if someone makes a payment, they cannot change their mind later and have their money back. You don t have to make any further payments into the Junior ISA once you ve opened it, but if you don t, the potential for investment growth will be minimal. If you decide to make a regular payment by Direct Debit you can choose to have your payment amount increased automatically each year from the anniversary of your child s Junior ISA s start date. It s a convenient way to make allowance for inflation and one less thing to remember! There s more about this option online and in the Key Features Document. Use KidStart to top-up your child s account We ve joined forces with KidStart so you can put a little towards your child s savings when you shop. KidStart help parents save money for their children by topping up their child s savings account when they make purchases at over 500 well-known retailers, including John Lewis, Mothercare, Waitrose, ebay and Argos. Simply join for free at kidstart.co.uk/tcm and add the details of your child s Junior ISA. Then login every time you go shopping and you ll collect money back that KidStart will pay across into your child s account. Imagine when you tell her tuition fees could be covered 7

8 What happens when my child turns 18? As your child approaches their 18th birthday we will contact them directly with information about the options open to them, and what they need to do next. They can cash-in the Junior ISA at that point, but if they don t want to use the money straight away, it will roll over automatically into a Forester Life adult stocks and shares ISA. If we don t offer an adult ISA at that time, we will transfer the value of the Junior ISA to another ISA manager, selected by us. Want to find out more about our Junior ISA? Online: Phone: weekdays 9am to 6pm. (Please note: we record calls for training and security purposes). juniorisa@thechildrensmutual.co.uk Write: The Children s Mutual PO Box 1189 Cheltenham GL50 9UF Want to apply? Apply online at The Children s Mutual, PO Box 1189, CHELTENHAM GL50 9UF Tel: mail@thechildrensmutual.co.uk Website: thechildrensmutual.co.uk The Children s Mutual is a trading name of Forester Fund Management Ltd. Registered Office: Forester Fund Management Ltd, Foresters House, 2 Cromwell Avenue, Bromley BR2 9BF. Registered in England number Forester Fund Management Limited is authorised and regulated by the Financial Conduct Authority. HSE-BR