In today’s article we are going to be discussing how to make the most of a Junior ISA nest egg.

How much you can contribute into a Junior ISA each year?

As of 6th April, the amount you can put into a Junior ISA (JISA) per annum has increased to £9,000 – quite a jump from the previous allowance of £4,368.

The tax saving this provides makes it an effective way of building up a nest egg for your children’s future to help with things such as a gap year, university fees, or to enable them to get a foot on the property ladder.

What types of JISAS are available?

You can choose to put the money into either a cash JISA or a stocks and shares one. In the current interest rate environment, the cash versions can attract quite generous rates with some as high as 4-5%. Another advantage is that they don’t have the volatility associated with the stock market, a particular issue at the current time.

Yet while the majority of JISAs tend to be in cash, this may be a wasted opportunity. Despite the recent turmoil, the stock market will usually outperform cash savings over the long term. As we have discussed in previous blogs if you can achieve higher returns , the impact of compounding can really add value. If you achieved a 6 per cent annual return a JISA that had £9,000 invested in it each year would be worth more than £290,000 after 18 years. As you can see, once compound interest kicks in, it can have a considerable effect. JISAs that had smaller sums of £50 or £100 a month invested into them would accumulate pots of £19,464 or £38,929 respectively.

So if you’re wanting to use the JISA as a vehicle for a long-term investment to give your child the best start to adulthood, cash may not the most effective way to do so.

Would a monthly contribution into a JISA be an appropriate option?

Both annual and monthly savings will have advantages and disadvantages. However, whether its monthly or annual amount, any savings are better than none at all.

What are the Inheritance Tax Implications when using JISA’s?

Parents or guardians are the only ones who can actually open a JISA but grandparents can pay money into the account. This can be a productive way of using up their annual gift allowance. They do just need to bear in mind the Inheritance Tax rules, though, especially now the JISA allowance has increased. The annual gift allowance on an Inheritance Tax free basis is £3,000 per donor (with one year’s allowance carried forward). Inheritance Tax could be charged on anything over this limit if you pass away within 7 years of making the gift and have an estate in excess of the inheritance tax allowance at the time. Gifts of up to £250 per person can be given during the tax year as long as another exemption has not been used on the same person.

What happens to the JISA when the child turns 18 and becomes an adult?

Once your child turns 18, the JISA becomes theirs. They can either access it directly or transfer it into an adult ISA. This encourages them to develop a lifelong interest in money and helps build up a great investment discipline. In fact, the Government’s decision to increase the JISA allowance was all part of its aim to create a generation of savers.

The new JISA allowance could mean that your child comes of age on a much sounder financial footing.

Can Howard Wright Help me with setting up a JISA for the benefit of my children?

Can Howard Wright Help me with setting up a JISA for the benefit of my children?

I’m sure you will now be thinking “Can Howard Wright Help me with setting up a JISA for the benefit of my children” in short the answer is yes. However, whilst the topic of this article has been JISA’s there are other options available when setting up investments for children or grandchildren that may be more suited to your specific financial circumstances. As such, before jumping in to a JISA it could be beneficial to discuss the savings goals with one of our chartered financial advisers who can assess if the JISA or another savings product could be beneficial for you.

The best way to contact me and our Chartered Advisers is to fill in our enquiry form below or phone us on 0345 688 4939 we will then able to book in a call at your earliest convenience.

Thank you for taking the time to read this article and we look forwards to seeing how we can help.


This article contains information from sources believed to be reliable but no guarantee, warranty, or representation, express or implied, is given as to its accuracy or completeness.  Howard Wright Ltd does not undertake any obligation to update or revise any future statements.  Past performance is not a reliable indicator of future results. Investments can go down as well as up and actual results could differ materially from those anticipated. This article is for information purposes only and has no regard to the specific investment objectives, financial situation or particular needs of any person as such, the information contained in this article is not intended to constitute, and should not be construed as, investment or financial advice.  Appropriate personalised advice should be taken before entering into any transactions.  No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication.  Howard Wright Ltd is Authorised and regulated by the Financial Conduct Authority.  

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