Means-tested benefits, like Universal Credit, look at how much money you have saved up. But money you're saving on behalf of your child generally isn't counted.
Families can get the advantages of junior ISAs (JISAs) for long-term investing without missing out on means-tested benefits. Keep reading to find out more about your options.
Article at a glance
- Your child's junior ISA doesn't affect your ability to claim means-tested benefits, such as Universal Credit. This is because the account is in your child's name and only they can access the money.
- But you can't move money into a child's junior ISA in order to claim Universal Credit.
- The money is in your child's junior ISA is likely to be taken into account if they apply for means-tested benefits themselves after the account matures.
What is a junior ISA?
Junior ISAs (JISAs) are saving or investment accounts for children. Children under 18 (under 16 if opening a OneFamily Junior ISA) who doesn’t have a child trust fund can have a JISA, but it needs to be opened by their parent or legal guardian.
A child can have a cash JISA, a stocks and shares JISA or both. Stocks and shares JISAs invest your money, so they have good potential to grow over the long term, but there's still a chance your child might get back less money than has been paid in.
With cash JISAs your money isn't invested and instead grows by earning interest like other savings accounts do, but your money may lose some of its value if inflation is higher than the interest rate.
Anyone can pay into a JISA, but the money can only be taken out by the child and only when they turn 18.
Do junior ISAs affect benefits?
No. Some benefits, such as Housing Benefit and Council Tax Support, are means-tested. This means your ability to claim these benefits depends on how much money you earn and how much you have saved.
But a JISA is in your child’s name, not yours, and you can't access it. So, it won't affect your rights to any benefits.
Because of this, a JISA could be a great way to invest for your child’s future, without worrying about your ability to claim means-tested benefits.
Can you claim Universal Credit if you have a junior ISA?
Possibly. At 18, you'll be able to apply for Universal Credit, but your JISA savings will be taken into account when it's decided whether or not you're eligible.
So, the answer depends on how much you have in your JISA:
- You can claim Universal Credit if you have £6,000 or less in savings
When you apply for Universal Credit, the first £6,000 of your savings won't affect your claim. So, if you have £6,000 or less, it will make no difference to your claim.
- If you have between £6,000 and £16,000 in savings, it will affect your Universal Credit claim
If you have between £6,000 and £16,000 saved, this will count towards your income and will affect how much you can get from Universal Credit. But you can still claim.
- If you have more than £16,000 saved, you can't claim Universal Credit
If you have more than £16,000 saved then you won't be eligible to claim Universal Credit.
Should I open a junior ISA?
Everyone has a right to save for their child, no matter their circumstances.
Because the amount you hold in a JISA doesn’t affect how much you can claim in benefits as a parent, it can be a great way to give your child a financial boost that could open up opportunities for them when they reach adulthood.
JISAs also don’t require you to keep up with any regular payments. You pay into it however much you want, whenever you want, up to £9,000 a year.
This means that if your income changes, but you still want to save for your child's future, you can just put away some money into their JISA whenever it feels comfortable for you.
It’s also possible for other family members or friends to help out since anyone can pay into a JISA.
When your child turns 18, they’ll be able to decide what to do with their JISA savings, so it’s a good way to start talking to them about money management and the importance of saving.
What would you like to do next?
Find out more about junior ISAs
Our guides contain everything you need to know to about investing for your child's future in a junior ISA.
Transfer to OneFamily
Transferring a child trust fund or junior ISA from another provider to OneFamily is simple and we don't charge you to do so.
Open a OneFamily Junior ISA
Give your child more options when they reach 18 with our straightforward Junior ISA. Simply choose one of our three climate-focused funds to start investing on their behalf.
Our Junior ISA invests in stocks and shares. The value is therefore likely to go up and down over time.
This is normal for this type on investment, but it means there is a risk your child could get back less than has been paid in if they withdraw at a time when the value is lower.
