Find out how Jisas work – plus our pick of the main providers.
A Stocks and Shares Junior Isa (Jisa) is an investment account for a child that protects money from income tax and capital gains tax in the same way that a regular ‘adult’ Stocks and Shares Isa does. Only parents or guardians can open a Jisa, but anyone can contribute – perfect for grandparents. The annual allowance is £4,128 for the tax year 2017/18.
The account is held in the child’s name, but the parent or guardian decides where to invest the contributions. The child can choose to manage their Jisa from the age of 16.
Danny Cox, a chartered financial planner at Hargreaves Lansdown, says: “The principles of portfolio picking for a Junior Isa are the same as for an adult Isa: spread your investment across the markets and sectors where you believe there are decent prospects for the long term and then choose good quality managers to work for you.
“The longer the time to invest, the more scope there is for parents and grandparents to be adventurous with their Junior Isa investments. For newborns, the investment world is therefore their oyster, and a higher allocation to smaller companies and emerging markets makes sense, because while volatility may be higher, so are the potential returns on offer for patient long-term investors.”
When a child reaches 18, the Jisa will become a standard Isa and they will have access to their savings. If a child has a Child Trust Fund, this can now be transferred into a Jisa. The Stocks and Shares Jisa market is divided into those that offer a wide range of investments to choose from and those that offer a limited range.
Providers that specialise in children’s investments may sound a good idea, but Moneywise research found that their Jisas are marred by high charges and limited investment choice. Foresters Friendly, One Family and The Children’s Isa have annual charges of 1.5%, 1.7%, and 1.06% to 1.66%, respectively. The Children’s Isa also takes up to 5% of your investments as an initial charge. They all offer minimum investments of £10 a month, but if you can afford to invest more than this, there are cheaper options with greater investment choice, detailed in the table below.
Which of these you pick will largely depend on how much you have to invest for the child on a monthly basis or via a lump sum. However, if you want to combine active and tracker funds using the Moneywise First 50 Funds list (see pages 80-81), then Charles Stanley Direct is our top pick for having the cheapest and most user-friendly option and allowing transfers in of Jisas and Child Trust Funds.
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