ISAs 

Will Jisas feather the nest for future needs?

  • Gain an understanding of how the Jisa is faring
  • Grasp the product's benefits and pitfalls
  • To learn about the best cash Jisas
CPD
Approx.30min
Will Jisas feather the nest for future needs?

The advent of a royal baby always brings with it widespread speculation. Will it be a boy or a girl? And what sort of gifts might be lavished upon such a child?

Perhaps someone might buy young Archie a Prada nappy bag for $2,000 (£1,530), or even Suommo’s exclusive solid gold Dodo bassinet, said to be the most expensive in the world at just shy of £10m.

Most parents spend their money on more basic costs like food and clothing, although even this can add up over the years. The 2018 Cost of a Child report by the Child Poverty Action Group says the overall cost of raising a child to age 18, including rent and childcare, is almost £151,000 for a couple and just over £183,000 for a lone parent.

This does not even take school fees into account, or further education after age 18, the costs of which can be eye-watering. For example, in 2017, the Institute for Fiscal Studies revealed the average debt on graduation was just over £50,000. No wonder many parents want to start saving as soon as possible to help cover the costs.

In April this year, Hargreaves Lansdown commissioned pollsters Opinium to ask 2,000 people what they had in mind when saving for children. While university costs came in at 40 per cent, and helping children on to the property ladder was 29 per cent, 46 per cent simply wanted to provide a cash lump sum for the child to do with as they pleased when the time was right.

A success or not?

For many people, a Junior Isa might seem a good place to start when it comes to saving. Jisas came into existence in November 2011, after the demise of the Child Trust Fund scheme. In the 2019-20 tax year, clients (and friends and family) can invest up to £4,368 tax-free into either a cash or stocks and shares Jisa for their child.

While the child can take control of the account at age 16, they cannot access the investments until they are 18, unless there is a genuine medical emergency.

But do advisers think the product has been successful? Some would say so. In the 2017-18 tax year, £902m was subscribed to Jisa accounts, according to HM Revenue & Customs.

Rachel Springall, finance expert for Moneyfacts, says: “It’s vital parents explain the value of money to children at a young age, and a Jisa is a perfect way to start building an awareness on why it’s important to save.”

Sarah Coles, personal finance analyst for Hargreaves Lansdown, agrees Jisas have become more popular since launch, citing HMRC figures showing how yearly subscriptions rose from 296,000 in the 2012-13 tax year to more than 907,000 new subscriptions by 2017-18 (see Chart 1). 

“It’s a pattern we’d expect from a brand new product, which needed time to bed in and for parents to get familiar with it,” she says.

Annabel Brodie-Smith, communications director for the Association of Investment Companies, says: “Jisas have been a success and many parents save for their children in investment companies through a Jisa.”

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. How does Mr Bamford describe the Jisa?

  2. What type of trust does Ms Coles recommend for children's saving?

  3. Mr Bamford says one client referred to the Jisa as what?

  4. Ms Brodie-Smith says a high interest cash account has returned what figure over 18 years?

  5. According to Ms Springall, what alternative vehicle could proveattractive?

  6. According to Ms Baker, what's the killer disadvantge to a junior cash Isa?

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  • Gain an understanding of how the Jisa is faring
  • Grasp the product's benefits and pitfalls
  • To learn about the best cash Jisas

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