NS&I introduces Junior ISA paying 2% but will be pulling its popular children’s bond from the market.
Whenever National Savings & Investments (NS&I) launches a new product it’s always huge news.
Whether it’s Premium Bonds, or the recent Guaranteed Growth Bond, millions of Brits stash their savings with the Government-backed institution.
Sadly, its latest launch doesn’t quite live up to the hype.
The cash Junior ISA, which lets you stash cash tax-free for your child, is an online-only account that can be opened with a minimum deposit of £1.
It promises to pay a rate of 2%, which falls well short of the best buy Junior ISAs on the market.
Coventry Building Society pays a market-leading rate of 3.25%, while a host of providers including Nationwide, Halifax and TSB all offer 3%. You can read our roundup of the best products here.
So if you are looking to set money aside for your child’s future, you’d be far better off choosing one of these accounts instead.
It’s also worth flagging up Stocks and Shares Junior ISAs. Provided you’re willing to take on some risk, these will most likely earn a far greater sum by the time your child grows up.
Still have an old Child Trust Fund? Find out how to move your savings to a Junior ISA.
Is safety worth paying for?
As we alluded to earlier, one of NS&I’s most appealing features is that 100% of savings are backed by the Treasury.
So is it worth accepting a lower rate in return for this security? After all, losing out on some interest is better than potentially losing all your child’s savings, right?
Not so. Provided you take out a Junior ISA with a recognised financial institution (like all the ones mentioned above), up to £85,000 of savings is protected by the Financial Services Compensation Scheme (FSCS).
Given that the maximum amount you can save into a Junior ISA this year is currently £4,128, it’s highly unlikely your kids’ savings will ever exceed the FSCS limit.
That means your money will be every bit as safe, but your rate is far, far better.
Sounds like a win-win to us.
Children’s bond is being pulled
Along with the launch of the Junior ISA, NS&I has also revealed it will be closing its Children’s Bond to new applicants from September.
Any existing customers holding these bonds will be able to keep the product until their current term matures.
“We will be writing to customers whose Bonds are approaching maturity to explain what their options are,” NS&I said in a release.
“Customers can also purchase the new Junior ISA online only at nsandi.com”
Invest for your child's future: compare Stocks and Shares Junior ISAs (capital at risk)