Junior ISA rules confirmed

The Government has today confirmed final details for Junior ISAs, to be launched on 1 November 2011. How will they work and will they be worthwhile? .

The concept is the same as conventional ISAs - they're a tax wrapper that can surround cash or investments, making interest tax-free and ensuring no further tax is deducted on dividends.

What's different with Junior ISAs?

There are three key differences compared to conventional ISAs:

• The annual contribution limit is £3,600 (not £10,680) until 5 April 2013, after which it'll increase annually with inflation (CPI).


• There is no restriction how contributions are split between cash and stocks & shares (in a conventional ISA the cash contribution is capped at half the total annual allowance).


• Children will only be able to hold one cash and one stocks & shares account at any time. So, unlike adults, they won't be able to potentially use a new ISA provider each year.

Which children are eligible?

All UK resident children under 18 who don't already have a Child Trust Fund will be eligible to open a Junior ISA - which basically means children born before 1 September 2002 or after 31 December January 2010.

When can the child get their hands on the money?

A child will be able to take responsibility for their Junior ISA from their 16th birthday, but will not be allowed to make any withdrawals until they reach 18. The only exceptions are on death or if the child is diagnosed with a terminal illness.

Assuming the child doesn't fully withdraw the money at 18 then the Junior ISA will be converted into a conventional one - after the ISA provider obtains the child's national insurance number and confirms they're still a UK resident.

Who can contribute?

Anyone can contribute into a child's Junior ISA, subject to total contributions not exceeding the annual limit. A Junior ISA can be opened by someone who has parental responsibility for the child and it'll be their job to manage it until the child reaches 16.

Will the government make any contributions?

No. It's too strapped for cash, which is why it stopped child trust funds (where the government did contribute some money on behalf of the child).

Will transfers be allowed?

Yes, but the child must stick to the rule of having only one cash ISA and one stocks & shares ISA account at any time (i.e. no more than one provider for each). However, it will be possible to transfer a Junior cash ISA into a Junior stocks & shares ISA and vice-versa.

What sort of choice will be available?

Too soon to tell. There are only a handful of child trust fund providers so Junior ISAs might suffer the same fate. Expect a few of the larger banks and some building societies to offer Junior Cash ISAs and hopefully at least one fund supermarket will offer a stocks & shares Junior ISA to ensure decent, cost effective, investment choice - child trust funds generally only offered overpriced trackers and a handful of expensive actively managed funds.

The rules covering what types of investments will be allowed within a Junior stocks & shares ISA will be the same as conventional ISAs - in broad terms most investments excluding shares traded on AiM (see our ISAs page for more details).

Can child trust funds be transferred into Junior ISAs?

No plans to allow this at present (although assuming Junior ISAs don't flop I'm sure it'll be allowed in future). The annual top-up limit for child trust funds will however be raised from £1,200 to £3,600, in line with Junior ISAs.

How much might a child build up by the time they're 18?

Here's a table with a few estimates and use our Junior ISA Calculator to get a clearer idea of how much your child might accumulate by the time they're 18.

Monthly Saving	3% Annual Return	6% Annual Return
£25	£7,138	£9,570
£50	£14,276	£19,140
£100	£28,552	£38,280
£200	£57,104	£76,560
£250	£71,380	£95,703
£300	£85,656	£114,844
Assumes monthly saving over 18 and annual returns are after charges.

Will Junior ISAs be worthwhile?

The cynic in me says what's the point? Most of the population can't afford to save enough for their own comfortable retirement, let alone save money for children or grandchildren.

However, there are probably sufficient numbers of parents and grandparents who can afford to save for children to ensure that Junior ISAs are viable. In that case their appeal will largely depend on choice, rates offered (on cash) and charges.

It's already possible to save tax efficiently for a child using a 'bare' trust (see our < ahref="http://www.candidmoney.com/kids/default.aspx">child savings page for more details). However, it's a bit of hassle and there are restrictions on how much interest a child can earn on gifts from parents before it's taxed as the parent's (£100 per parent per child).

So while Junior ISAs are unlikely to offer anything new, they should make tax efficient saving for a child more straightforward for some. And there might be some juicy interest rates on Junior cash ISAs at launch that could be worth taking advantage of.

Read this article at http://www.candidmoney.com/articles/article239.aspx

How to find value of US stock certificates?

Question
I am trying to sort out a series of US stock certificates that I believe are part of a boiler room fraud scam: is there a register of shares or companies that i can access to quickly ascertain if these are worthless?Answer
If the stocks concerned are traded on a mainstream stock market then getting their value should be as easy as a quick search on the web - sites such as google or yahoo finance should display current trading prices.

But if they're listed on an obscure stock exchange then getting a share price could prove harder. I'd start by checking the US Securities Exchange Commission (SEC) EDGAR database, where all listed companies must regularly file certain documents. It won't give you a share price, but should confirm whether the company still exists and on what exchange it's listed. You could then contact that stock exchange for further details.

If the company is not listed on an exchange then getting hold of a price might prove nigh on impossible, because this depends on finding interested buyers and seeing what price they'll offer. It's also far harder to get access to US company information and accounts than in the UK because companies are incorporated at a state level in the US, I don't believe there's a single equivalent of Companies House. If you can determine which state the companies were incorporated in you can then potentially get more information from the state concerned, there's a list of links on the Companies House website.

Good luck and I hope the shares are worth something.

Read this Q and A at http://www.candidmoney.com/questions/question543.aspx

Should my wife top up her state pension?

Question
My wife worked for 12 years, was at home looking after our children for the last 12 years, and has most recently been back in employment for 2 years; what can we do about voluntary contributions to her state pension; does she qualify for HRP?Answer
Home Responsibilities Protection (HRP) was scrapped on 6 April 2010 in favour of giving national insurance credits to parents who receive child benefit for a child/children under age 12.

However, your wife would have looked after your children while HRP was still in force, so she should have automatically built up an entitlement under that scheme. HRP worked by reducing the number of years of national insurance contributions required to enjoy a full state pension by one year for every year child benefit was received for a child under 16, subject to not reducing the qualifying contributions required below 20 years.

Her HRP benefits will be converted into qualifying years under the new system (up to a maximum of 22 years), likely to be 12 years in her case. This leaves a further 18 years of national insurance contributions needed to reach the required 30 years for a full basic state pension. It sounds like she has 14 of these, so provided she works a further 4 years before retirement she should receive the full basic pension.

However, rather than rely on my guesstimates, much better to get an accurate projection via the State Pension Forecast. It's not unknown for forecasts to sometimes omit HRP (converted into a national insurance contribution credit), if so then contact HMRC (ideally with her child benefit number) and they should correct this.

As for paying extra contributions, this usually makes sense when due to retire with less than 30 years of service. Extra service can be purchased via class 3 national insurance contributions, currently at a rate of £12.60 per week of service, i.e. £655.20 for a year. Given each £655.20 buys 1/30th of the full basic state pension for life, £177.06 a year rising by the higher of earnings, prices (CPI) and 2.5%, it's likely to end up a good deal.

Read this Q and A at http://www.candidmoney.com/questions/question542.aspx

Question
I'm hoping you may be able to advise me as I'm in a difficult situation at present after losing my long standing job due to ongoing illness. I was given a small payout (7k) and want to try and need to live on some of it and save some, hopefully to make as much on it as possible. I already have an ISA with 3k in it on a 3% deal with Halifax from 2010- transferred over to the latest deal they have for 3.2% (I think).

I need my finances to be secure, so cant invest in anything too risky, however I need to maximise interest/money made on it as this money is to live on. I know about ISA's and was thinking of perhaps opening a new ISA for this year as I believe I can do that as the Halifax one is a transfer from 2010, so is 2010's fund. I was thinking of the Santander one of around 3%. Is there something that would make me more money, such as shares/tracker funds?

Any advice would be a great help.Answer
I'm sorry to hear about your situation. I think investing in the stock market is probably the last thing you should do - far too risky given you can't afford to lose money - so you're right to focus on savings accounts.

Cash ISAs can be beneficial as the interest is tax-free. I assume you're a taxpayer for the current tax year (runs from 6 April 2011 until 5 April 2012) due to your earnings from when you were working, so a cash ISA would be of benefit. And, in any case, the rates tend to be competitive so there's really no downside to using a cash ISA over a conventional savings account.

The Santander Flexible Cash ISA currently pays the highest variable rate at 3.30%, which includes a 2.8% bonus over the first year. On the maximum £5,340 allowed contribution this would pay annual interest of £176 - hardly worth getting excited about, but it's the best rate you can currently get on cash without tying up your money.

Opting to tie up your money on a fixed rate will give slightly better rates, up to 4.65% fixed for 5 years within a cash ISA with Birmingham Midshires, but I think this could prove too inflexible given your uncertain situation.

Outside of a cash ISA the current 'best buy' instant access savings accounts are the Derbyshire BS NetSaver at 3.11% and Coventry BS Poppy Online Saver at 3.10%. Like Santander, they both include temporary bonuses so be prepared to shop around when the rates come off the boil.

I'm sorry I can't offer you a more profitable solution, but I don't think there is one that'd be appropriate. You could earn annual dividend income of around 5-6% (net of basic rate tax) by investing in some stock market income funds (e.g. Schroder Income Maximiser), but then stock market falls of around 10% - 20% are not out of the question and I really don't think it's worth you taking such risks (as mentioned above).

As an aside, I'd suggest checking which state benefits you're entitled to (if you haven't already). There's a helpful tool on the http://www.direct.gov.uk/en/diol1/doitonline/doitonlinebycategory/dg_172666 Direct Gov website - may as well try and get some benefit from all the tax you've paid over the years!

I hope things work out.

Read this Q and A at http://www.candidmoney.com/questions/question540.aspx

Good account for short term savings?

Question
Do you have any thoughts on the Saga Telephone Saver I've just be told about?

I'll shortly be having some National Savings Certificates mature and am thinking of putting the money into this Saga account for future use to buy a car, new kitchen and bathroom and am told this would be a good place to hold it whilst deciding on best deals on all these items.Answer
The Saga Telephone Saver account is a straightforward instant access savings account provided by Birmingham Midshires. The interest rate is currently 2.75% (before tax), which includes a 1% bonus during the first year - such bonuses being usual for most 'best buy' accounts these days.

When you open the account it's linked to one of your existing accounts (e.g. current account) so when you request withdrawals (by telephone) the money is sent straight over (usually arriving within 3 days). There are no restrictions on withdrawals, so it sounds like it'll suit your needs.

My only suggestion is that there are other similar accounts on the market paying more interest and if you're a taxpayer who hasn't used their ISA allowance this year then a cash ISA would be advantageous as interest is tax-free.

For example, at the time of writing the Derbyshire Building Society NetSaver account pays 3.11% (including a 2.11% bonus until November 2012) and allows withdrawals to a linked account via the Internet.

And Santander pays 3.30% on its Flexible Cash ISA, including a 2.80% bonus for the first year. Instant access withdrawals are allowed by Internet, phone or branch.

The only downside with accounts such as these paying bonuses is that you can more or less guarantee the rate will become uncompetitive when the bonus ends. So just be prepared to shop around and move the money elsewhere in future if there's any money left in the account when the bonus expires.

As to how much difference the various rates above would make, here's a quick example showing the annual interest, after tax, per £10,000 of savings. I've assumed the rates don't change from current levels:

Account	non-taxpayer	basic rate taxpayer	higher rate taxpayer
Saga	£275	£220	£165
Derbyshire	£311	£249	£187
Santander	£330	£330	£330

You obviously have the option to roll-over the maturing Savings Certificates into another issue, but since you'll need to the leave the money untouched for at least a year to stand a chance of getting a return it sounds too inflexible for your needs.

Good luck bargain hunting on your car, kitchen and bathroom, there should be lots of good deals around in the current climate!

Read this Q and A at http://www.candidmoney.com/questions/question539.aspx

Good value will service?

Question
I and my husband are on the point of making a second will as the first one we made 25 or so years ago is now not fit for purpose. As there is so much choice for us in the world today, I do like to do a little research before making up my mind who I would like to give my business to.

Last week we attended a seminar called Universal Asset Protection which was very informative but the one thing I forgot to ask was if they were a regulated company. As you have been extremely helpful to me in the past, I thought you may be able to help me out on my query and have any advice you can give me in my quest to get a good price deal as some solicitors are charging extortionist fees!

I have also been quoted package deals which include:-

Will including Discretionary Will Trust,
Lasting Power of Attorney - property and affairs
Lasting Power of Attorney - health and welfare
Severance of Tenancy (Tennants in Common) if applicable
Letter of Wishes

The total price is £995 plus VAT for a couple.

Would you consider this as a good price for the package?

I look forward to hearing from you and once again, Justin, many thanks for your previous responses - most helpful - better than having a bank manager in your wardrobe!Answer
The biggest rip-off when it comes to will writing is the companies concerned appointing themselves as executor of the will and subsequently charging extortionate fees to carry out these duties when you pass away. The executor's job is to ensure the correct amount of inheritance tax, if any, is paid and that everyone named in the will gets their share of your estate – a process called ‘probate'. In my view it's better to nominate a trusted relative or friend, who can either carry the task themselves or appoint a reasonably priced professional when the time comes.

Anyway, back to the present. Based on typical solicitor prices the amount being charged doesn't look horrendous, but equally it's not cheap. Universal Asset Protection's website contains little information, but I get the impression they're a marketing company that passes on the work to other professionals. As this inavariably involves sales commisison type arrangenments it might bloat costs, but hard for me to comment as I don't know their business.

Discretionary will trusts are less useful than they once were. These used to be popular to ensure that the first partner to pass away could use their full nil rate band (e.g. passing assets to children/grandchildren while ensuring the trust kept control), but rule changes in 2007 mean that any unused nil rate band on first death can now be passed to the surviving partner. Where discretionary will trusts can potentially still be worthwhile is if you want the flexibility to include as yet unknown beneficiaries (e.g. grandchildren not yet born), you're concerned that the value of assets will rise faster than the nil rate band after the first death or you want to remove assets from the estate over concerns the surviving spouse may have to use them to fund long term care (e.g. your home might be held as 'tenants in common').

However, bear in mind that if the value of assets placed into the discretionary exceeds the nil rate band a 20% 'lifetime chargeable transfer' tax will apply, followed by a further tax of 6% every 10 years.

Assuming you would benefit from such a will then the going rate for a straightforward scenario seems to be around £300-£600 inc VAT (for a couple).

Lasting Powers of Attorney can be helpful if concerned that you might one day be unable to make sensible decisions on your finances and welfare, perhaps due to suffering from Alzheimer's. Solicitors tend to charge around £100 - £200 per power of attorney (so £400+ to write each for both you and your husband).

But there's a further cost charged by the Office of the Public Guardian (OPG), the government department responsible for lasting powers of attorney, of £120 per power of attorney registered, so £480 in this instance. I doubt your quote includes this - it's good value if it does!

Tenancy in common tends to be a good thing (it means a husband or wife can pass their share of a property to beneficiaries on their death, making use of their nil rate and getting the assets out of the survivor's estate) so I'm not sure you'd want to sever any existing arrangements, but this will obviously depend on your situation and requirements.

Letters of wishes are not legal documents, but can be used to inform executors of your assets and any special wishes, e.g. burial/creation plans and how you'd like any trusts to be managed. There's little reason not to simply write this yourself, but a solicitor would typically charge £100+.

I'd also check whether the quote includes compulsory storage costs, as these can become significant over time. If you'd prefer not to keep a will at home (there's no reason not to provided you're confident it'll be safe) there are companies offering storage services from around £15 per year.

In terms of cheaper options, I recently stumbled across a company called Beneficient Law - interesting as they're run as a not-for-profit community interest company. I've not used them (so can't vouch for the quality of their work or service), but they seem to have favourable feedback on the web and charge very sensible fees. For example, their fee for two wills is £50 and £70 for two lasting powers of attorney.

Do any readers have experience of this company or feedback on will writing prices?

Read this Q and A at http://www.candidmoney.com/questions/question536.aspx

How best to buy gold?

Question
I would like to take out a long-term investment. Maybe about 5 - 10 years.

I have £70,000 to invest.

I'm thinking about buying gold.

I can't afford to buy a gold bar, so I was thinking about buying gold coins.

How would I go about this ?

The only gold company I know of is Johnson Matthey.. I believe they are a bona fide company, so I've thought of buying through them.

What would you advise?Answer
If the £70,000 will represent most of all of your investment pot then I'd be very wary about putting it all into one type of investment. Spreading it across a range of investments should reduce risk, as if one investment bombs you won't lose your shirt.

As for gold, with global turmoil more likely to increase than decrease there is an argument that the price will rise further still. However, bear in mind that much of the recent price rise has been due to higher demand from investors rather than for jewellery (which normally accounts for the majority of demand). Jewellery demand will likely rise longer term as emerging markets grow, but if investors sell off shorter term then the price could fall quite sharply. The latter is unlikely to happen while markets are struggling, but is very likely once global economies are more settled again (which could be some years away). More info in my article here.

As for how to invest, buying physical gold coins or bars (they come in various sizes) is one route. Smaller coins and bars tend to sell for a premium to the actual gold price, plus you'll need to factor in costs for storage and insurance (it's generally not a good idea to store lots of gold at home). Nevertheless, it's a straightforward way to invest and provided you buy from an established dealer who certifies their coins/bars you should be fine. Or you could consider services like Bullionvault that store the gold for you (see my answer to this question).

A convenient alternative is to track the gold 'spot' price using exchange traded funds such as ETFS Physical Gold and Gold Bullion Securities (cost is about 0.4% a year plus stockbroker dealing fees to buy and sell (£10 or less online). These funds back your investment with gold bars, so should theoretically be safe. Or you could look at the Perth Mint Gold Certificate Program (see my review here).

A further option is to buy shares in gold mining companies, either directly or via an investment fund. Share prices tend to exacerbate gold price movements and there's operational risk too (e.g. the company might suffer production problems at one of its mines), so the risks tend to be higher.

Good luck whatever you decide.

Read this Q and A at http://www.candidmoney.com/questions/question533.aspx