In the government’s first budget Chancellor Rishi Sunak more than doubled the Junior ISA limit from £4,368 to £9,000 from 6 April marking the biggest increase in the JISA allowance since they were first introduced in 2011. The increased allowance will also apply to Child Trust Funds (CTFs) which JISAs replaced.
This is a huge change that will allow parents to save life-changing amounts for their children. However, it is really a benefit for wealthy, higher earners as most ordinary people are unable to save £9,000 a year for themselves, let alone for each child.
The government’s motivation for the hike is unclear because the average JISA contribution last year was just £994, so essentially 11% of the new allowance. The hike in the allowance seems extraordinary compared to other more pressing priorities such as making life more affordable so that ordinary people. It should have been considering other measures to ease the strain on ordinary incomes. This would allow people on normal income to put money aside and instil the savings habit at home.
What’s a JISA?
A Junior ISA (JISA) is a long-term savings account which allows tax free savings to be made for children. Parents can open one for their child if they are under 18 and living in the UK. Junior ISAs can be cash or stock and shares ISAs and interest, capital growth and dividends will not be taxed.
While parents can open a JISA and manage the account, the money belongs to the child. The child can take control of the account at the age of 16 but cannot access the money until they turn 18 when it becomes a standard ISA.
If the new allowance of £9,000 per year was invested from birth for a child, £162,000 could be saved tax free (compared to £78,624 under the existing allowance). With an annual return of 4% the result would be a pot of £240,000 by the age of 18, a significant increase on the £116,500 that could be achieved under the existing allowance.
The 4% return is an illustrative example. It would, of course, depend on whether you saved into a cash ISA or a share ISA, and how much risk you were prepared to take. The short-term impact of the Coronavirus on the stock markets has been severe so you may find that off-putting at the moment, but remember that investing is for the long term (especially for a child) — and short-term shocks are smoothed out over the long term.
Where to invest
If you can afford to save or invest this much for your children’s futures, the next question is how to find the best home for your children’s money. Not all investment platforms and providers offer Junior ISAs, so it’s useful to use our calculators to find those that do.
On Platform
| JISA available | JISA not available |
|---|---|
| AJ Bell Youinvest | Aviva Consumer Platform |
| Bestinvest | Barclays Smart Investor |
| Cavendish | Close Brothers |
| Charles Stanley Direct | Equiniti Shareview |
| Chelsea Financial | Financial Discounts Direct |
| Fidelity | Fundsnet |
| Hargreaves Lansdown | Halifax Share Dealing |
| Interactive Investor | iWeb |
| The Share Centre | Santander Investment Hub |
| Vanguard | Selftrade |
| Willis Owen | Strawberry Invest |
| True Potential Investor |
Going Robo
| JISA available | JISA not available |
|---|---|
| Brewin Portfolio Service | EQ Investors |
| ETFmatic | eVestor |
| Moneybox | Exo Investing |
| Munnypot | Gear Investments |
| Natwest Invest | HSBC My Investment |
| Netwealth | IG Smart Portfolio |
| Nutmeg | InvestEngine |
| Santander DIA | Moneyfarm |
| Wealthify | OpenMoney |
| Wealthsimple | Plum |
| Scalable Capital | |
| Tickr | |
| True Potential Investor (Portfolios) | |
| Wealth Horizon | |
| Wombat |
Above are the DIY investment platforms and robo-advisers that offer Junior ISAs. However, there are other factors to consider such as whether you’d like to choose your own investments or alternatively leave it to the professionals. There are also factors such as the depth and breadth of investments on offer, how much help and guidance platforms provide, and of course how much you pay for holding these investments.
You can review the different investment platforms here and the different robos here. It’s also worth running the investment platform and robo calculators to see how they stack up over time.
