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The ABC of Junior ISAs: Limits, allowance and more

Investing in a Junior ISA is possibly one of the most effective ways for you – and others – to save for your child’s future.

J.P. Morgan Investment Trust Team

18 Feb 2019

To get the most out of a Junior ISA (JISA), it’s best to start early and save on a regular basis. Not only will this help increase the value of your nest egg, it can also encourage good investment habits for both you and your child.

Here are five good reasons to invest in a JISA:

Junior ISA limits and allowances

A JISA - like a standard ISA – is effectively a tax-efficient wrapper allowing you to invest up to £4,368 in 2019-20, either in cash or stocks and shares. This allowance is on top of your regular ISA-savings allowance (£20,000). Remember, there is no capital gains tax (CGT) to pay on investment gains, and investment within this wrapper can grow in a tax-efficient environment.

When can my child access their JISA?

Money invested in a JISA is locked away until a child’s 18th birthday, so these are ideal longer-term investment plans. If you start saving when your child is young you’re looking at a 15-year-plus horizon. This means you could think about a more adventurous strategy, for example putting money into investment trusts that have exposure to emerging markets. These may be more volatile over shorter time frames but have the potential to deliver higher returns over the longer term.

How much do I need to open a JISA?

You don’t need to have a large lump sum or be especially wealthy to open a JISA. Most providers offer regular investment plans that can be opened from as little as £25 per month.

Even relatively small amounts can build to a sizeable sum over long periods, particularly when compound returns are taken into account

Even relatively small amounts can build to a sizeable sum over long periods, particularly when compound returns are taken into account – in other words, getting returns on your investment returns. Regular savings plans also help smooth out stock-market movements; ideal for those investing in more adventurous sectors.

Who can contribute to a Junior ISA?

Parents are not the only ones who can save into a JISA. Grandparents, godparents and family friends can all contribute, provided the total invested does not exceed £4,368 in the 2019-20 tax year. These contributions do not affect the donor’s own ISA allowance.

Educational benefits of Junior ISAs

Investing in a JISA can help you demonstrate good savings habits and highlight the growth potential of equities to your child. The rewards of this may last even longer than the JISA plan itself. J.P. Morgan Asset Management offers a variety of investment trusts suitable for Junior ISA investment. This includes our multi asset trust, JPMorgan Elect Managed Growth as well as more adventurous options, investing in a range of global markets. The JPMorgan Emerging Markets Investment Trust for example, may be an option for parents with a longer-time investment horizon.

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This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not a reliable indicator of current and future results.
 

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