68% of low income parents haven't heard of Junior ISAs

child savings hands©iStock.com/MarkPiovesan

JUST over half - 56% - of parents with children under the age of eighteen have never heard of the Government's flagship children's saving initiative, the Junior ISA.

According to research from Family Investments, a provider of Junior ISAs and other savings and investment products, awareness among low income households is particularly low.

Just 32% of parents in households with an income under £28,000 said they knew about Junior ISAs.

Junior ISAs: a slow start

Since Junior ISAs were launched in November last year, less than 3% of eligible parents have used them to put away tax-free cash for their children.

This shouldn't come as a surprise: unlike Brown's Child Trust Fund (CTF) scheme, Junior ISA account holders don't get a lump sum from the Government to kick start their saving habit unless they're in care, a lost incentive that was always going to significantly decrease take up.

In addition, tax-free status alone is hardly a huge bonus for under 18s since savings accounts for children can be made tax exempt with HMRC form R85 (available here) in any case.

The final nail in the coffin was that many of the biggest banks and building societies were slow to release Junior ISA products and even slower to promote them among eligible customers.

As far as we can divine from financial advisers and the Treasury's own statistics, Junior ISAs holders are highly likely to have high incomes.

The average Junior ISA, again according to Treasury statistics covering the first five months of the scheme, was £1,614, far more than most families can afford to set aside.

Time for ethical accounts?

But if, as critics argue, Junior ISAs are failing to help children from low and middle income families into a more secure financial future, the market does seem to be becoming more ethical than it's predecessor in another respect.

Ethical and green banking and investment funds have leapt on the new product, offering more opportunities for disenchanted consumers to switch into the UK's burgeoning ethical market.

Triodos told me that subscriptions to the junior cash ISA they launched in February this year - the only explicitly ethical junior cash ISA available, although many small building societies also offer accounts - far exceeded their expectations.

Uniquely, Triodos customers can view the more than 1,500 sustainable enterprises their money is funding on the bank's dedicated website.

The solar PV installation at Glastonbury's Worthy Farm and green power company Ecotricity are both funded by Triodos, for example.

Family Investments, who offer junior ISAs which invest in the FTSE4Good UK 50 Index, said they had also experienced an upswing in demand.

"For many parents, making sure the investments they make for their children's future are ethical is very important, as it is one of the ways that they can help protect the world for the next generation," Kate Moore, Head of Savings and Investments said.

"That's why the ethical Junior ISA is a popular product."

YouGov research released for National Ethical Investment Week 2011, found that 6% of British investors would be interested in green or ethical Junior ISAs.

However, the same research found that 42% of British investors wanted to 'make a difference' as long as they were also making money.

Do ethical funds prioritise principles over performance?

We put this question to Ecclesiastical's Children's ISA Director Barrie Dawson.

"Obviously every fund manager's main aim is to provide a positive return on investments whether they are ethical specialists or not," he said.

"Ethical funds aim to deliver the returns that investors seek, but with the additional benefit of making a positive contribution to society or the environment. Ecclesiastical's unique approach which has helped them deliver profits with principles."

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