13 November 2014 - Chelsea Financial Services today reveals the top-selling Junior ISA funds among its clients since the introduction of the tax-efficient savings and investment vehicle that encourages parents to save for their child's future. Junior ISAs were made available to the British public on November 1st 2011.
Chelsea Financial Services Junior ISA top ten best sellers*
Marlborough Special Situations
Marlborough UK Micro Cap
M&G Global Emerging Markets
Rathbone Global Opps
Liontrust Special Situations
M&G Global Dividend
Newton Asian Income
Newton Global Higher Income
Woodford Equity Income
Speaking on the release of the list, Darius McDermott, managing director, Chelsea Financial Services, said:
“It is quite clear from these statistics that our investors putting money in Junior ISAs are prepared to go into higher risk areas such as smaller companies, companies in recovery and emerging market stocks. Secondly, all of the top ten most popular funds are equity funds.
“Apart from the tax incentive, what really appeals about the JISA is the length of investment horizon – because JISAs can only be accessed at the age of 18, parents with very young children can take on more investment risk. Furthermore, record-low interest rates make the case for equities in JISAs even more compelling. Presently, cash accounts and 10-year gilts return either a derisory or negative real return on investments when you factor in inflation. Moving into higher-risk investments is a calculated risk with JISAs and looking at historical data equities have greater long-term potential for returns than cash.”
What is a Junior ISA?
The Junior ISA is a version of the long-standing and popular ISA but aimed at parents, guardians and grandparents who wish to save for a child's future. There are some differences, one being the annual contribution, which is £4,000 for the 2014/15 tax year. However, the ISA advantages of no capital gains tax and no further liability to income tax are the same.
Why should you use the Junior ISA allowance?
Act now to protect your child's future. The Junior ISA could be used for university costs, house deposits, a wedding or possibly a car. Alternatively, at the age of 18, the Junior ISA will automatically be rolled into an “adult” ISA and remain invested.
Who is eligible?
Junior ISAs are available for any child who is resident in the UK and wasn't eligible for the Child Trust Fund. In other words, children born before 1st September 2002, who are still under the age of 18, and any child born after 1st January 2011.
How much can I invest?
The current annual limit is £4,000. Contributors can either invest lump sums or make regular monthly savings.
To give you an idea as to how much could be saved on behalf of a child, a monthly contribution of £50, assuming 7% growth per annum, could provide a pot of over £21,000 over 18 years. A monthly contribution of £300 could grow to almost £130,000.
Monthly Savings Example
The chart below shows the possible Junior ISA value that could be accumulated, based on the level of contribution and varying potential annual rates of return over 18 years (the amounts do not take into account charges or inflation).
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius' views are his own and do not constitute financial advice.