Junior ISA

 Its aims

• to provide your child with a tax efficient investment
• enable you, and other people with an interest in your child’s financial future, to contribute to a tax efficient investment on behalf of your child
• provide an increase over the medium to long term (5 years plus) to the value of the money you or others have invested with us by the addition of yearly and final bonuses from the With Profit Fund
• make available the proceeds of the investment to your child from age 18 free of Income and Capital Gains Tax under current ISA Rules

Your investment

You, and other people with an interest in your child’s financial future, can invest an amount between £50 and £3,600 on behalf of your child. Although the plan has no fixed term it should be considered as a medium (5 years plus) to long-term investment. The proceeds of the plan will belong to your child.

You cannot withdraw the proceeds of a Junior ISA once invested. Your child will be able to withdraw the proceeds only when they reach age 18, although they can become responsible for the account from the age of 16. Once your child reaches age 18 the Junior ISA will become a normal ISA.

Any money invested is held in the Red Rose Friendly Society With Profit Fund, which aims to combine security with capital growth over the long term.

Risks

The value of the Junior ISA depends on the future performance of the investments held in the With Profit Fund and the bonuses we distribute from any profits arising from these investments.

HM Revenue and Customs may change the tax status of a Junior ISA in the future.

You should be aware that inflation may have an effect on the purchasing power of the investment in the future.

We may apply a Market Value Reduction when the proceeds of the Junior ISA are withdrawn (on or after age 18) in poor investment conditions, and this could mean that the Junior ISA gives back less than has been paid in.

Questions and answers

What is the Red Rose Junior ISA?

A Junior ISA is a tax-efficient way in which you, and other people with an interest in your child’s financial future, can save on behalf of your child without your child having to pay any income tax or capital gains tax.

The Red Rose Junior ISA is a Stocks and Shares ISA.

Will paying into a Junior ISA affect my own ISA allowance?

Paying into a Junior ISA on behalf of a child will have no effect on your own ISA allowance or anyone else’s ISA allowance who contributes on your child’s behalf.

Who can have a Junior ISA?

You may open a Junior ISA on behalf of a child as long as the following conditions are met:

• you are over the age of 18, live in the UK, are ordinarily resident here for tax purposes and are the person who assumes parental responsibility for the child

• the child is born after 3^rd January 2011 or born before 1^st September 2002 and is under 18 years of age.

• the child is resident in the UK

Parents, grandparents, friends or anyone with an interest in your child’s financial future can contribute to a Junior ISA on behalf of your child.

A Junior ISA can only be held in the name of one child. Joint Junior ISAs are not permitted. A Junior ISA cannot be used to save on behalf of a company, club, charity etc.

Warning: A Stocks and Shares Junior ISA carries a higher risk than a bank or building society Junior Cash ISA.

How much can I invest?

You, and other people with an interest in your child’s financial future, may invest annually up to the current contribution limit of £3,600. This is the allowance for the 2011/12 tax year and may change in future tax years.

You may invest this allowance in a Junior Stocks and Shares ISA, or in a Junior Cash ISA, or in a combination of the two types of Junior ISA on behalf of your child.

Your child may only have one Junior Stocks and Shares ISA and one Junior Cash ISA at any one time. These can be held with different providers but the total amount invested across both types of Junior ISA must not exceed the contribution limit for each tax year.

An existing Junior ISA may be transferred into another Junior ISA, regardless of whether they are Junior Stocks and Shares ISAs or Junior Cash ISAs.

If you decide to make regular payments into a Junior ISA then you can increase, decrease or stop your payments at any time without penalty. Just inform us in writing if you wish to alter your regular payment.

How do I transfer an existing Junior ISA to the Red Rose Junior ISA?

To transfer an existing Junior ISA to us from another provider you must complete a  transfer form. We will then send the transfer to the existing provider and write to you when we have received the money. The transfer may take up to 30 days.

If you wish to transfer the Junior ISA away from Red Rose to another firm please ask them to request the transfer.

How will my child’s investment grow?

We will invest any monies received in our With Profit Fund, which holds a mix of assets including stocks and shares, property, gilts, bonds and cash. The market values of these assets move up and down over time. These movements may affect how much we add to investments as bonuses.

The aim of the fund is to provide customers with steady investment growth over the full savings period of their investment. To do this we keep back some of the investment returns we make in good years so that we can pass them on in years when performance is not so good.

We add the returns as a yearly bonus. At the end of the plan, we may pay a final bonus depending on how the fund has performed. Once a bonus is added it cannot be removed except by the application of a Market Value Reduction. You can find out more information about how our fund works in our document called “A guide to how we manage our with-profit business” which comes with this document.

What might the benefits be after 5 and 10 years?

An example of £3,000 invested

• If the investment grew at 3% a year the value after 5 years would be £3,070 and after 10 years would be £3,300. 

• If the investment grew at 5% a year the value after 5 years would be £3,380 and after 10 years would be £4,020.

• If the investment grew at 7% a year the value after 5 years would be £3,720 and after 10 years would be £4,860.

Will the investment work out exactly as in the example?

The example we have provided is only an illustration of what the investment may be worth.

What your child will actually get back depends upon how our investments perform and the bonuses allocated.

Your child could get back more or less than this.

Do not forget that inflation could reduce what your child could buy in the future.

What happens if I or the child should die?

Should you, or anyone who has made an investment into the Junior ISA, die before your child reaches age 18 then nothing will change. Your child will continue to own the Junior ISA, and will be able to withdraw proceeds from the plan at the age of 18.

If your child should die before age 18 then we will pay a death benefit to your child’s estate. The amount payable will be 100% of your initial investment plus all yearly bonuses we have added and any final bonus we may pay, subject to a minimum payment of 101% of your initial investment.

How will I be kept informed about the Junior ISA?

Each year you (or your child on reaching age 16) will receive a statement showing the amount and value of any bonus payments and the total value of the Junior ISA.

How do I cash in or withdraw money from the Junior ISA?

You may not cash in or withdraw money from the Junior ISA at any time. When your child reaches age 18, they will be able to withdraw some or all of the proceeds. There are no charges applied to a withdrawal but we may apply a Market Value Reduction (please see section ‘What is a Market Value Reduction’).

How will charges affect the investment and what are the deductions?

We deduct charges from the investment to cover our expenses associated with administering and managing the plan.

We currently charge a fee equal to 5.0% of any investment made into the plan to cover the costs of setting up the plan, and an annual fee of 1.5% of the value of the plan to cover our on-going management costs.

The figures below assume the investment will grow at 5.0% a year.

The last line of the table below shows that over the term illustrated the effect of the deductions could amount to £866. Putting it another way, this would have the same effect as bringing the investment growth from 5.0% a year down to 2.7% a year.

What is a Market Value Reduction?

If our investment returns have been low, we may use a Market Value Reduction to make sure your child does not leave the fund with more than their fair share of its assets. This is to protect plan holders who still have money in the fund, but it may mean that your child may receive less than you expected. We would not use a Market Value Reduction if your child died.

Can I change my mind about opening a Junior ISA?

From the later of the date you open your account, or receive the cancellation notice, you have 30 days in which to cancel the plan you have set up on behalf of your child and we will return your money in full.

If you cancel within the 30 days, the child will be treated as though they had not used any Junior ISA allowance and you would be able to subscribe to another Junior ISA on behalf of the child in the current tax year. You may not cancel the Junior ISA after the 30 days.

How much will the advice cost?

Your financial adviser will tell you details about the cost of advice.

Where can I find out more?

Before your child’s plan starts we will send you the full terms and conditions. These explain how the plan works. If you would like to see these terms and conditions before you apply please contact us:

Phone:             01254 222702
Fax:                 01254 222705
Email:              info@redroseassurance.co.uk
Web:                www.redroseassurance.co.uk

More information

Claims

To make a claim please contact us by phone on 01254 222702 and ask for the IFA Broker Department. They will explain the claims process and send out a claim form.

Cancellation Rights

After we accept your application, we will send you a notice of your right to cancel. You will then have 30 days to change your mind and leave the plan. To exercise your right to cancel you will simply need to follow the instructions on the cancellation notice.

Complaints

If you wish to make a complaint please contact:

If we do not deal with your complaint to your satisfaction, you can complain to the:

Making a complaint will not affect your right to take legal action.

Past performance

Please note that past performance is not a guide to future performance. It is important to understand that future bonuses depend on profits yet to be earned and as a result cannot be guaranteed.

The Financial Services Compensation Scheme

We are covered by the Financial Services Compensation Scheme (FSCS), which means you may be entitled to compensation under the terms of the scheme if we cannot meet our obligations. This depends on the type of business and the circumstances of the claim. For long term plans such as this the scheme covers 90% of the claim with no upper limit. Further information about the scheme is available from the:

Financial crime

We will take measures to protect members against financial crime. We may need proof of identity on application or claim and if required we may gather this proof by electronic means, for example checking electoral registers.

Tax

Any information we have provided in this leaflet about taxes in the UK is based on our understanding of current laws and HM Revenue and Customs practice which may change in the future.

Data Protection Act

Under the Data Protection Act, you have the right to ask to see any personal information that we may hold about you or your child, and to have any mistakes in this information corrected. You can do this by writing to the data protection officer at our head office. There may be a charge for this.

Legal

The plan is governed by the laws of England and Wales.