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Junior turns 10!

The Junior ISA (JISA) launched the same year the iPhone 4S came to the market. It’s grown in popularity (unlike the iPhone 4S, which has been made redundant with continual newer upgrades) and ten years on JISA continues to appeal to specific groups.

What’s a junior ISA?

If you want a tax-free way to build a nest egg for children, a JISA could be the account for you. Although parents must open a JISA on behalf of their children, anyone can contribute to one. JISAs are a great way for adults to make tax-free savings on behalf of children up to the age of 18.

Up to £9,000 can be saved or invested each tax year. JISAs can hold cash or stocks and shares, or a combination of both. Junior cash ISAs are available from many banks and building societies while junior stocks and shares ISAs are offered by some fund companies and most investment platforms.

Growing in popularity

According to the HMRC, money was paid in to over one million accounts in the last tax year and the numbers keep growing.  interactive investor published some of its JISA stats recently. On its platform, the average JISA value is £13,285 while the average age is nine. In terms of investments, ii accountholders are pro-equity and adventurous with the top investment choices being the Scottish Mortgage investment trust, Fundsmith Equity and the Vanguard LifeStrategy 80% funds.

It is worth pointing out here that money in a JISA belongs to the child and they obtain full access to the money when they turn 18. This does instil fear in some parents who think they might spend it all, but others view it as a great way of building a nest egg for their children and teaching them good financial habits.

Doubling up

One slight quirk is that children aged 16 and 17 can also open an adult cash ISA. So for two years it’s possible for 16- and 17-year-olds (or their parents) to save up to £9,000 per year into their JISAs plus an additional £20,000 per year into their adult cash ISA. This can then be transferred into an investment account once they turn 18, without losing any of the tax-free benefits — great for wealthy parents and kids.

Click here to find the best home for your kids’ junior ISAs. Some D2C platforms will host your Junior ISAs for free if your investments are also on their platform, so it’s worth doing a broader review of your investments and considering whether you should move them elsewhere.

Photo by Phil Hearing on Unsplash


About the Author:

Michael Reid
Michael joined Fundscape after 24 years in financial Services at AEGON and abrdn where he focused on market insight to drive strategic planning, platform analysis and project management for both the direct and advised markets in the UK. Michael likes to spend downtime running up hills and keeping fit. When not in the hills he enjoys watching his daughter learning to play hockey. He’s an avid supporter of the Scotland Rugby team and travels anywhere to see them play.

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