A record £1.068 billion was paid into Junior ISAs during the 2020/21 tax year, according to the latest official figures.
A total of 943,000 Junior ISAs were subscribed to, as generous parents, relatives and friends paid money into children’s nest eggs.
The market value of all Junior ISAs is now £7.15 billion. Like adult ISAs, there are two types of Junior ISA: cash ISAs, plus stocks and shares ISAs.
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More than half (57%) of children with a Junior ISA have the cash version.
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If you are looking at stocks and shares junior ISA, we reveal the most popular funds and shares are when investing for your children, according to Hargreaves Lansdown.
Most popular JISA funds (alphabetical, as of 11 July 2023)
Baillie Gifford American
Baillie Gifford Managed
BNY Mellon Global Income
Fidelity Index World
Fundsmith Equity
HSBC FTSE 250 Index
IFSL Marlborough UK Micro-Cap Growth
JPMorgan Emerging Markets
Legal & General Global Technology Index Trust
Legal & General International Index Trust
Legal & General UK 100 Index Trust
Legal & General UK Index
Legal & General US Index
LF Lindsell Train UK Equity
Lindsell Train Global Equity
Rathbone Global Opportunities
Stewart Inv Asia Pacific Leaders Sustainability
Vanguard LifeStrategy 100% Equity
Vanguard LifeStrategy 80% Equity
Vanguard US Equity Index
Most popular JISA shares (alphabetical, as of 11 July 2023)
Alphabet
Amazon.com
Apple
Aviva
Barclays
Berkshire Hathaway
BP
Glencore
GSK
HSBC Holdings
International Consolidated Airlines Group
Legal & General Group
Lloyds Banking Group
Microsoft
Rio Tinto
Rolls Royce Holdings
Shell
Tesla
Unilever
Vodafone Group
Why use a stocks and shares Junior ISA?
Investing the money, rather than leaving it in cash savings, has more potential to grow and beat inflation. But there are risks involved.
Sarah Coles, head of personal finance at the investment platform Hargreaves Lansdown, says: “Parents may be wary of investments, because they’re worried about the risk of losses. It’s hardly surprising, because when markets fall sharply it makes headlines, whereas when they rise over the long term nobody notices. It means we can overestimate the risk of market falls. And at the same time, we may underestimate the risk that money in a cash JISA doesn’t keep pace with inflation.”
According to Coles, investing a JISA has benefits beyond the potential growth too, because it can be used as a tool to get your child interested in the world of finance and investing. “If you talk to your child about their investments, they can build their understanding and interest in it. And they never need to worry about whether they’re the kind of person who invests, because they already do.”
While the majority of youngsters with a Junior ISA have the cash version, the proportion with a stocks and shares ISA is growing. Previously about 70% of those paying into a Junior ISA put money in a cash account, now the figure is less than 60%.
Laura Suter, head of personal finance at the investment platform AJ Bell, comments: “Cash JISAs have continually been more popular, as parents either don’t want to take risk with their child’s savings or lack the confidence or time to invest. But more parents are choosing to invest for their children rather than just stick it in cash. This switch makes sense as children potentially have the longest savings horizon in which to ride out the ups and downs of the stock market to harvest higher returns.”
I have a child trust fund. Should I move it to a Junior ISA?
Children born between 1 September 2002 and 1 January 2011 automatically received a child trust fund (CTF). These were later replaced by Junior ISAs, but there is still a huge amount of money held in CTFs.
According to Hargreaves Lansdown, the market value of all CTFs is £10.48 billion (versus £7.15 billion for Junior ISAs).
Some of these youngsters have now turned 18 and can access their CTF nest eggs. However, it’s estimated that 45% of accounts that have matured have not yet been claimed - – equating to 428,000 accounts and a massive £943m of money. On average there is £2,203 per account sitting waiting to be claimed.
Some parents will have completely forgotten about these accounts, and the teenagers who own the money won’t have any idea that these savings exist - which could be very useful to help pay for further education, or perhaps buying a car or putting towards a deposit on a first home.
CTFs and Junior ISAs both have the same tax benefits and the same £9,000 annual limit. “However, if you keep your money in cash you can get a better rate in a JISA [currently 5.5%, with Beverley Building Society], and if you’re in an investment CTF, you may be paying over the odds in charges. Some investment platforms don’t charge JISA clients a fee for holding funds or shares.” These include Fidelity and Hargreaves Lansdown.
Suter adds: “More people are now transferring their CTF to JISAs, to benefit from the greater investment choice and often lower charges that JISAs offer.”
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