Significant Increase in Junior ISAs: Triple Fold Rise in Children Holding over £100,000 Over Past Year
Investing in a Junior Individual Savings Account (ISA) has become increasingly popular, with more parents and guardians looking to secure their children's financial future. Here's a rundown of some key facts about Junior ISAs and their performance in the 2021 financial year.
Firstly, the Junior ISA allowance stands at £9,000 per tax year, a sum that can be paid in full or in parts by anyone, including grandparents, aunts, uncles, and friends. When a child turns 18, the money can be transferred into an adult ISA.
The returns from a Junior Stocks and Shares ISA can be more attractive over the long term compared to a Cash Junior ISA. However, it's important to note that all investments come with risks, and past performance is not a guarantee of future results.
In 2021, a notable increase was observed in the number of children with Junior ISAs worth over £100,000. The figure more than tripled from the previous year, with 1,910 children reaching this milestone. Moreover, 370 children had Junior ISA wealth exceeding £200,000, a significant jump from the 40 recorded in the previous year.
The top 50 child investors boast an average Junior ISA wealth of £761,000, a substantial sum that could potentially help a child complete their degree without debt or serve as a first-time buyer's deposit.
Contributing £150 a month from birth with a 5% annual return after fees could result in a £50,000 Junior ISA by the child's 18th birthday. Increasing the contribution to £300 a month could result in a Junior ISA windfall of around £100,000.
While HMRC has not yet confirmed the existence of a Junior ISA millionaire, financial experts predict it may happen soon. Hargreaves Lansdown, a well-known investment firm, has 1,160 ISA millionaire customers.
It's also worth mentioning that parents or guardians can contribute to a Junior Pension, with contributions benefiting from 20% income tax relief. Additionally, a discretionary trust can be used to pass wealth to the next generation in a tax-efficient manner, with the parents as trustees having control over when the money is released.
However, it's important to remember that the savings in a Junior ISA cannot be touched until the child turns 18, at which point they can spend or save the cash as they please. There is no public information about who first acquired a Junior ISA with one million pounds in the UK.
As of 2021, 16,420 children have a Junior ISA worth £50,000 or more, an increase from 8,130 the previous year. This trend suggests that more parents are recognising the long-term benefits of investing in their children's future.
In conclusion, Junior ISAs offer a valuable tool for parents and guardians to save for their children's futures. With careful planning and regular contributions, it's possible to build a substantial nest egg for a child's education, first home, or other life milestones.
