Junior ISAs set to launch next week

Child with piggy bank

Ahead of the launch of Junior ISAs next week, research shows that investing in certain investment companies over an 18-year timeframe can produce spectacular returns of more than 700%.

Research compiled by the Association of Investment Companies for Money Observer shows that six investment companies delivered returns of more than 700% over the past 18 years. The top performer was Gresham House, which returned a massive 1,927%, however it is now in the process of winding up.

Other investment companies that produced big returns include HgCapital (1,104%), Hansa Trust (786%), RIT Capital Partners (775%), TR Property (749%) and JPMorgan European Smaller Companies (745%).

JISA launch 1 November

JISAs launch on 1 November. Replacing child trust funds, they are available to children born on or after 3 January 2011, children under 18 born before September 2002 and children who don't already have a CTF.

JISAs allow parents to save up to £3,600 a year tax-efficiently towards their child's future. Parents can opt for a cash Jisa or stocks and shares Jisa, and the only tax that is payable is the 10% dividend tax on any share holdings.

The child will be able to access the money when they reach 18 years of age.

Looking at open-ended investment funds, the top funds over the past 18 years have not performed as well as the top investment companies. According to data analysts FE Analytics, of the 523 retail investment funds with an 18-year track record, the runaway leader was Jupiter European Income, which returned 739% over the period.

Other funds that would have given investors more than six times their initial capital include JPMorgan Natural Resources, up 652%; Halifax UK Growth, up 638%; Scottish Widows American Smaller Companies, up 607%; and Fidelity European, up 605%.

Higher risk

Pascal Dowling, investment specialist at FE, comments: "With an 18-year time horizon, parents can afford to take the higher level of risk associated with stocks and shares JISAs. Nonetheless, they will also seek the reassurance that whichever fund they choose has the potential to deliver good, consistent returns.

A diversified selection of funds run by established investment firms and experienced portfolio managers should enable parents to sleep at night."

He adds: "Past performance should only be the starting point for parents assessing the best funds for their JISAs particularly since many new funds have come to the market over the last 18 years."

The best performing Investment Management Association sector over 18 years was China/Greater China, up 385%. The UK smaller companies sector and North American smaller companies also performed well, up 342% and 278%, respectively. At the other end of the spectrum, the Japan sector lost money, falling by almost 13%.

This article was written for our sister website Money Observer

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Your Comments

I do not have children, but am a godmother, a responosibility I take seriously in this day and age where costs of living are so high and family units are so dispersed, making costs even tougher.

I would like to provide for my godchild as much as possible; supplement what a middle class parent can provide these days. I think that this is a wonderful idea, but would I be able to participate in this kind of an ISA for my godchild?

Hi Natalia,

It's great that you're thinking about saving for your godchild.

Unfortunately, you must be a parent or a legal guardian to open up a junior ISA for a child. However, once it's open anyone can contribute up to the annual limit.

If the parent of your godchild decide not to open a JISA you can always look at other children's savings accounts (if it is a saving you're thinking of and not investing) on the market. Remember that while JISAs are tax-free, children have (just as adults) an annual tax-free allowance (currently £7,475). This means that unless they have savings above that limit they won't have to pay any tax on any interest earned.

Hope this helps.


I have one child with a CTF and a younger without. CTF's will undoubtedly be less well managed and performance will tail off now that they have been "discontinued". Will it be possible to transfer a CTF into a JISA?

Hi Johanna, just read your reply to Natalia and wanted to clarify something. When you stated that due to children having the annual tax free allowance of £7475 you then said that unless they have savings above that limit they wouldnt have to pay tax.... I previously thought it was the interest earned annually on the savings that had to be below this limit to be tax free, but you have stated its the actual capital, which is correct? Many thanks...

So am I right in understanding that if your children have a CTF, up to £1,200 can be paid in each year, but with a JISA, £3,600 is allowed? If so, this feels like kids born between September 2002 and January 2011 are being penalised. I take the point that kids have a personal allowance, which they're very unlikely to reach, but am I missing something on this differential between the CTF and JISA?



 Hi All,

There seem to be a lot of confusion surrounding the junior ISA. I will try and answer your queries.

Unfortunately, it will not be possible to transfer a CTF into a junior ISA so children with CTFs will have to stick with them. However, it is going through the parliament at the moment and people are lobbying for merging them into the same product so watch this space.

Sarah, to make it fairer the government has announced that the annual limit you can put into a CTF will now be the same as the one for junior ISAs - so that will be £3,600 each year.

Jean, yes you are quite correct, the tax-free allowance will be on the interest you earn and not the amount you put in each year. Apologies. This should have been clarified. However, if you are the parent saving for your child the interest cannot be more than £100 a year. Otherwise you will be taxed on it as if it would be your own money.

Hope this helps.