The Junior ISA is a version of the long-standing and popular ISA, but aimed at parents, guardians and grandparents who wish to save for a child's future.
There are some differences, one being the annual contribution amount, which is much lower for Junior ISAs than it is for regular ISAs. However, the ISA advantages of no capital gains tax and no further liability to income tax are the same.
The Junior ISA could be used for university costs, house deposits, a wedding or possibly a car. Alternatively, at the age of 18, the Junior ISA will automatically be rolled into an “adult” ISA and remain invested.
Junior ISAs are available for any child who is a resident in the UK, but must be opened by a parent or guardian. If the child already has a Child Trust Fund (CTF), they cannot have a Junior ISA as well, but they can have their CTF investment transferred to the Junior ISA.
The person opening the Junior ISA will be making all the investment decisions about where to invest until the child reaches 16, at which point the child can choose to become involved in these decisions.
The money cannot be accessed by anyone until the child's 18th birthday, at which point the Junior ISA becomes a standard ISA, the property of the child and fully accessible.
The 2021/2022 tax year annual limit is £9,000. Contributors can either invest lump sums or make regular monthly savings from as little as £10 per month with Chelsea.
To give you an idea of how much could be saved on behalf of a child, a monthly contribution of £50, assuming 7% growth per annum after fees, could provide a pot of over £21,000 over 18 years*. A monthly contribution of £300 could grow to almost £130,000**.
Monthly savings examples
The chart below shows the possible Junior ISA value that could be accumulated, based on the level of contribution and varying potential annual rates of return over 18 years (the amounts do not take into account charges or inflation).
You can invest money into a Cash Junior ISA, an Investment Junior ISA or a combination of both, as long as the total amount does not exceed your annual limit.
Transfers between Junior ISAs are possible so, if you wish, you can change the fund in which your child's savings are invested or, if you find a Cash Junior ISA account with a better rate than your current provider, you can move the money. You must transfer the savings in full though. You can also transfer Junior ISAs from cash to funds and back again.
One downside of a Junior ISA is that, unlike the adult ISA, the investment cannot be accessed until the child is 18 – so you can’t withdraw any money you have invested before that time. When the child turns 18, the investment is passed entirely into their hands. They could roll over their investment into an adult ISA, or use the money to pay for a university course, a car, a deposit on a house or a gap year. It is up to them what they do with this pot of money.
With the Chelsea Junior ISA, you have an amazing choice of funds and, as with all our other investment products, we aim to help you build an investment portfolio that will meet your objectives.
We know that having such a large choice of funds can be overwhelming, so we offer three ways to help you narrow down your investment choice.
1. Tips on choosing a fund
We've put a guide together to help you choose the right fund for you.
2. Selection lists
Our independent fund research team meet many fund managers every year. Their aim is to identify the funds they think are the best and to narrow down the choice for you. Their picks are listed on the Chelsea Core Selection and Chelsea Selection lists.
3. VT Chelsea Managed Funds
For a complete investment solution you might like to consider the VT Chelsea Managed Funds.
Please familiarise yourself with the Terms & Conditions and Key Investor Information Documents on the 'documents & guides’ page of our website then complete the Junior ISA application form or transfer form and return it to us. Please make your cheque payable to Aegon or complete the direct debit mandate if saving monthly.
There will then be a separate charge for the fund(s) in which you invest. This is typically 0.75% per annum but varies from fund to fund.
Unlike some other providers, the charges from Chelsea are all-inclusive and there are no extra, surprise fees for things like telephone or postal dealing, printing valuation statements and switching. So if you change your mind about your investment and want to move it into another fund(s) you can.
* The Calculator Site, compound interest calculator, £50/mth, 18 years, 7% annual interest rate, compounded monthly
** The Calculator Site, compound interest calculator, £300/mth, 18 years, 7% annual interest rate, compounded monthly