Junior ISAs a hit within the family tree

Over a third of parents with children under the age of 18 (36%) would be likely to take out a Junior ISA for their child, according to a study by J.P. Morgan Asset Management.  A further 43% of people would contribute to a Junior ISA if one was opened by a relative or close friend, nearly half of which (45%), expect to do so as grandparents.

The study conducted by J.P. Morgan Asset Management's Investment Trusts group revealed overall contributions into a Junior ISA by parents, relatives and close friends could potentially make a pot of £1,117 on average per year, less than half the £3,600 limit. Contributions from relatives or friends are half the amount of those from parents, with the former stating they would contribute on average £542, in comparison to parents who say they would contribute £1,155 on average per year.

David Barron, Head of Investment Trusts at J.P. Morgan Asset Management, said, "It is encouraging to see that it is not just parents who would consider contributing to a Junior ISA, and that it is the wider network of family and friends and in particular grandparents who also realise the importance of saving for a child's future in a tax efficient way. Our calculations show that 18 years of investing the average contribution pot of £1,117 every year (£93 per month), assuming a 5% return per annum, would mean a savings pot worth over £34,000 by the time the child turns 18."

Barron went on to say, "The impact of saving £93 per month is significant, particularly when saving in the current environment can be challenging. However, if savers are looking to a Junior ISA to fund large future outgoings, such as perhaps university fees (up to £27,000 over three years), they could consider trying to increase their contributions. Saving the total Junior ISA amount of £3,600 per annum (£300 per month) could result in a sum of over £100,000."

The study highlighted that a quarter of people (23%) would contribute to a Junior ISA opened up by a friend or relative for their child as it provided a better alternative to buying the child a present. In addition, 13% felt it provided a tax efficient way to help them save for that child's future. 

Barron continued: "It has never been more important for parents to start planning towards their child's future. With increasing costs, such as the rise in tuition fees at university, planning ahead and building a savings pot will go a long way to giving a child a positive step into adulthood.

"Investment trusts are ideal investment options for Junior ISAs, particularly in a low interest rate environment when a cash Junior ISA will offer limited income at present. Investment trusts can offer income from dividend payments and their long term investment objectives are in line with those of a long term saver."

Barron concluded, "Furthermore, holding a Junior ISA on a fund platform, such as JPMorgan WealthManager+, where you can access a range of different types of funds can provide flexibility through the lifetime of the investment by giving access to a range of investment options including funds, investment trusts, equities, ETFS, gilts and bonds."

J.P. Morgan Asset Management Junior ISA

J.P. Morgan Asset Management will be offering a Junior ISA in the first quarter of 2012. The Junior ISA will be available on J.P. Morgan Asset Management's direct platform, JPMorgan WealthManager+, along with ISAs, SIPPs and investment accounts, which can invest in funds offered by both J.P. Morgan Asset Management and other fund providers.