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How to pick the best Junior Isa

When choosing a Jisa provider you need to consider investment choice, cost and service
July 12, 2018

A junior individual savings account (Jisa) is a tax-efficient way to save or invest for your child. You can make a contribution to a Jisa every tax year between your child's birth and 18th birthday, at present up to £4,260 per tax year. A Jisa has to be opened by a parent or legal guardian, but others can contribute to it, for example grandparents or friends. However, once your child reaches 18 they assume control of the account, so if you want control over how the money is managed or spent after then a Jisa may not be the best option. 

Your child can have a cash or a stocks-and-shares Jisa, or both. But they can only have one cash Isa and one Investment Isa open at a time. 

If your child is in their mid to late teens and plans to use the Jisa within the next few years, for example to fund university costs, a cash account might be better as the money does not have long to ride out any falls in the market. Financial advisers generally suggest a minimum five-year holding period if you invest in equities.

But if you are investing for a younger child a stocks-and-shares Jisa is probably a better option because over the long-term these assets tend to outperform cash. 

You can open an investment Jisa via a platform or directly with an asset manager, although asset managers tend to only offer their own products.

"Fund houses also tend to sell the more expensive fund share classes direct to retail clients, whereas platforms offer [cheaper share classes]," says Justin Modray, director at Candid Financial Advice. "Often that means you can get the same funds that an asset manager offers at a lower cost from an investment platform. Even with the platform fee, the overall cost tends to be lower."

Platforms provide access to a wide range of investments including open-ended funds, investment trusts, exchange traded funds (ETFs) and shares. They enable investors to view all their investments in one place, and many platforms allow you to hold your children's Jisas alongside your own accounts so that you can view and administer them all together.

If you have multiple accounts with a platform it could be worth asking if you can have a discount, says Mike Barrett, consulting director at platform research company the lang cat.

Most platforms allow you to select your own investments, although many offer ready-made junior Isas, including: AJ Bell Youinvest, Charles Stanley Direct, Fidelity Personal Investing, Hargreaves Lansdown, The Share Centre and Vanguard. Which type you opt for depends on how much time you are able or want to spend managing your children's investments.

 

Self-select investment Jisa providers

If you prefer to pick the investments for your child's Jisa, platforms that offer this option include AJ Bell Youinvest, Alliance Trust Savings, Bestinvest, Charles Stanley Direct, Fidelity, Interactive Investor, Hargreaves Lansdown, The Share Centre and Vanguard.

The main things you need to consider when choosing a platform are the ability to transfer in, investment choice, cost and service.

If you want to move platforms you need to transfer the full value of your child's existing account because you can only hold one stocks-and-shares Jisa at a time. And if your child was born between 2002 and 2011 they might have a Child Trust Fund, which you could transfer into a Junior Isa. However, not all platforms allow transfers in, for example Fidelity. And platforms such as Willis Owen and Vanguard do not facilitate transfers in of Child Trust Funds.

Also check how much it costs to transfer out of your existing Jisa provider as some platforms charge fees of between £15 and £25 per holding to transfer investments out as investments rather than as cash. The more investments you have in a Jisa, the more it will cost you to leave a platform that does this. However, Fidelity, Bestinvest, Chelsea Financial Services and Willis Owen do not charge for transferring out.

It is a good idea to opt for a platform with a wide investment choice so you can shift the portfolio around without having to transfer it to another provider if your investment strategy changes. For example, when you first start building a Jisa you might take a high-risk approach, but as the time gets closer to your child drawing the money you might move into lower-risk assets to preserve what you've made.

Also look at how much it costs on a total basis to invest in the assets you want. Platforms charge a range of fees, including annual, transaction, transfer, and regular investing and dividend reinvestment fees, so you need to work out how much it will cost to invest in the way you want.

Platforms with percentage fees tend to be more cost effective for smaller accounts, typically with a value of under £100,000, the value bracket into which Jisas fall. Percentage-charging platforms include Charles Stanley Direct, which charges 0.25 per cent for a portfolio of funds worth up to £250,000, and 0.25 per cent for share portfolios of any value with a minimum charge of £24 and maximum of £240 a year. And Chelsea Financial Services charges 0.3 per cent a year to hold a Junior Isa invested in open-ended funds. 

The quality of the provider's service is also a consideration. Holly Mackay, chief executive officer of personal finance website Boring Money, says Charles Stanley Direct and Hargreaves Lansdown have good customer service and administration systems for investors who self-manage Jisas.

Mr Modray says a way to test how effective a company's service is before you invest is to contact its customer helpline to see how quickly they respond and how knowledgeable their staff are.

 

Junior Isa providers 

ProviderMinimum InvestmentPlatform chargesOnline dealing costsRegular investment costsDividend reinvestment costsInvestment optionsTransfers
AJ Bell YouinvestNo min. for lump sum; £25 for monthly investmentShares (including investment trusts, ETFs, gilts and bonds): 0.25% (max £5 per quarter); Funds: 0.25%Funds: £1.50 per trade; Shares: £9.95 per trade or £4.95 if 10 or more shares trades in previous month.£1.50 per trade 1% (min £1.50, max £9.95)Funds, shares, investment trusts, ETFs, gilts and bonds; ready made passive portfolios Transfer in: No charge; Transfer out: in specie: £25 per holding ; Cash: no charge
Alliance Trust Savings£50 for lump sum or monthly investment£3.33 a month£9.99 per trade£1.50 per trade £5 per tradeFunds, shares, investment trusts, ETFs, gilts and bondsTransfer in: No charge; Transfer out: £100 plus VAT
Bestinvest£50 for lump sum or monthly investmentFirst £250k: 0.4%, £250k-£1m: 0.2%, over £1m no charge. Funds: no charge; Shares: £7.50No chargeNo chargeFunds, shares, investment trusts, ETFs, gilts and bonds; ready made portfolios Transfer in: No charge; Transfer out no charge unless transferring out as a share certificate, which is: £20 per asset
Charles Stanley Direct£50 per month or a £500 lump sumFunds: £0-£250k: 0.25%, £250k-500k: 0.2%, £500k-£1m: 0.15%, £1m-£2m: 0.05%, over £2m:  no charge; Shares:  0.25% (Min. of £24, Max. of £240 a year)Shares: £11.50 per trade; Funds: no chargeNo chargeNaFunds, shares, investment trusts, ETFs, gilts and bonds; ready made portfolios Transfer in: No charge; Transfer out: in specie: £10 per holding; Cash: no charge
Chelsea Financial Services£1 for both lump sum or monthly investmentJunior Isa: 0.3% per yearFunds: no chargeNo chargeNo chargeOpen-ended funds only; ready made portfoliosTransfer in/out: no charge
Fidelity Personal Investing£1,000 lump sum;  £50 monthly regular investmentUp to £7.5K: £25; £7.5k - £250k: 0.35%, £250k - £1m: 0.2%, Over £1m: no chargeFunds: no charge; Shares: £10 per trade£1.50 per trade Funds: no charge; share dividend reinvestment: £1.50Funds, shares, investment trusts, ETFs, ready made portfolios Transfer in: not available; Transfer out: no charge
Hargreaves Lansdown£25 per month or £100 lump sumFunds: up to £250k: 0.45%, £250k to £1m: 0.25%, £1m - £2m: 0.1%, Over £2m: no charge; Shares: 0.45% capped at £45 per yearFunds: no charge; Shares: £5.95 per dealFunds: no charge; shares: £1.50 per trade1 % (min.of £1, max. of £10)Funds, shares, investment trusts, ETFs, gilts and bonds; ready made portfolios Transfer in: No charge; Transfer out: in specie: £25 per holding; Cash: £25 
Interactive Investor£25 per month or £100 lump sum£90 a year (charged quarterly at £22.50 – which gives an equivalent £22.50 of trading credits a quarter)£10 per trade£1 per trade £1, with min. dividend value for reinvestment of £10Funds, shares, investment trusts, ETFs, gilts and bondsTransfer in: no charge; Transfer out: in specie: £10 per line of stock (min. £30 max. £250)
One Family£10 a month or a lump sum of £500Junior ISA: All-inclusive annual management charge: 1.5%naNo chargenaTwo ready made portfoliosTransfer in: no charge; Transfer out: no charge
Scottish Friendly£10 a month or a lump sum of £100Junior Isa: All-inclusive annual management charge: 1.5%No chargeNo chargeNo chargeThe My Select Junior ISA offers 8 funds to invest inTransfer in: no charge; Transfer out: no charge
The Share Centre£10 a month or a lump sum of £100£1.20 per month£7.50 per deal for trades less than £750, 1% for £750 and above0.5% (min. £1)0.5%Funds, shares, investment trusts, ETFs, gilts and bonds; ready made portfolios Transfer in: no charge; Transfer out: £25 per account
VanguardMin. account opening amount of £500 lump sum or £100 per month; after which no min. to lump sums0.15% per year of the value of account holdings up to £250k. (Max. annual charge of £375); no further charge on holdings above £250kFunds: no charge; ETFs traded at set bulk trade times twice a day: no charge; live quote ETF trade: £7.50 per trade No chargenaA range of 72 Vanguard funds and ETFs, including index funds, active funds, LifeStrategy fund range, Target Retirement funds and ETFsTransfer in: only from Jisas not child trust funds - no charge; Transfer out: no charge
Wealthsimple£1 for both lump sum or monthly investmentUp to £100k: 0.7%; Over £100k: 0.5%naNo chargeNo chargePersonalised readymade passive portfolios consisting of 10-15 fundsTransfer in: no charge; Transfer out: no charge
Willis Owen*£25 per month or lump sum0 - £50K: 0.40%, £50k- £100k: 0.30%, £100k- £250k: 0.20%; £250k+: 0.15%Shares: £7.50 per trade; Funds: no chargeNo chargeFunds: no charge; no automatic reinvestment on shares and other asset classes but investors can  manually reinvest dividends for £7.50 per tradeFunds, shares, ETFs and investment trusts.Transfer in: only from Jisas not child trust funds - no charge; Transfer out: no charge
XO.co.uk No minimum for lump sumNone£5.95 per trade nanaFunds, shares, ETFs and investment trusts.Transfer in: no charge; Transfer out: £15+ VAT for each line of stock.

Source: providers

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