The Junior ISA - One Year On

It has been just over one year since the Junior ISA was introduced and observers have quickly started to examine whether the scheme has been successful. Detractors have been quick to claim that the initiative has not been as successful as it should have been; however, a closer look at the figures could suggest that the Junior ISA scheme has actually been more worthwhile than many think. Junior ISAs are tax-efficient savings schemes for children. The account can be opened by parents or guardians when a child is born and once the child turns 18 the money that has been saved for them will be passed into their possession.
Many commentators have compared the first five months of the Junior ISA scheme and with the first five months of the Child Trust Fund scheme and jumped to the conclusion that the Junior ISA has not been as popular as the CTF. It is true that in the first five months of the CTF initiative - September 2002 to April 2003 - 415,000 accounts were opened. In contrast, the first five months of the Junior ISA scheme saw only 72,000 accounts opened (between November 2011 and April 2011). At a brief glance at the figures, with very little consideration of the surrounding factors - it may appear that the Junior ISA is something of a flop in comparison to the Child Trust Fund. However, there are a number of factors that need to be taken into account when trying to judge the successfulness of the JISA.
Firstly, there is the matter of the amount of data that is currently available. HM Revenue and Customs have released some useful information about the Junior ISA - for example the number of accounts opened and how much the accounts totalled (116 million). However, this information only covers from November 2011 to April 2012 - not the entirety of the year that the Junior ISA has been in operation. Many people have been keen to look at the value of the Junior ISA on its one-year-anniversary but this cannot really be done effectively until we have more data that covers the whole period. Despite this, until more data and statistics are available to us, we will have to use what is currently available.
It also needs to be taken into consideration that under the Child Trust Fund scheme the government offered financial incentives to the public to try and encourage them to open a CTF account. These incentives took the form of a voucher that was usually worth 250. The Junior ISA, however, did not offer any form of governmental incentive. This means that the number of people who opened a Junior ISA account between November 2011 and April 2012 does not include an equivalent of the people who signed up for the CTF just for the voucher and did not really make subsequent use of the CTF account. In addition, if parents did not open a CTF on behalf of their child, the government would do it for them whether they wanted one or not. It has been claimed that of the 415,000 CTF accounts opened in the first five months, more than a quarter were opened by the government.
Studies into the Junior ISA have found that many people simply do not know enough about the Junior ISA scheme. The majority of parents agree that it is important to save for their children's future, but in a study carried out 56% of parents surveyed did not know what the Junior ISA scheme is because they had not even heard of it. In order for the Junior ISA to reach its potential awareness needs to be raised. People need to know what saving options are available for them. A raise in awareness may well mean a raise in account numbers. The economic climate must also be taken into account. Many people are finding they have less money to put aside into savings and are therefore less likely to want to open a new savings account.
Initially it would seem that the Junior ISA has not done as well as the Child Trust Fund did in its opening months. However, when the circumstances surrounding the JISA are taken into account, it appears that the Junior ISA is doing better than first thought. Though less people have taken out an account, the people that have are investing more. Currently the average held in a JISA account is 1,614 while the average for the Child Trust Fund was only 321. The Junior ISA has also had to contend with a lack of awareness, a lack of incentives (when compared with the Child Trust Fund) and confusion surrounding the rules when it was first introduced. This confusion meant that a number of providers were not ready with their Junior ISA plans when the scheme first began. Until there is more data available, we cannot make a complete analysis of the Junior ISA's success, but so far it would seem that 72,000 accounts and 116 million is indicative of success, somewhat against the odds.

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