11 March 2020 - After a speech that lasted more than an hour this afternoon, and more shouts of “Getting it done” than we could keep up with, Rishi Sunak, the Chancellor of the Exchequer, failed to mention some good news for savers: the Junior ISA allowance is to almost double, rising from the current £4,368 to £9,000 next tax year.
The increase to Junior ISA limits came as a positive surprise to us here at Chelsea.
Managing director, Darius McDermott, said: “It basically means that parents, grandparents and other family friends, can stash away enough each year to cover the annual cost of university for children, and a whole lot more on top.
“Investing £750 a month over a period of 18 years could result in enough money to not only pay for university fees, but also the purchase of a house – or a substantial deposit. Assuming 5% annual returns, an overall investment of £162,000 would grow to a pot of money worth £261,901.52*.
“As the average price of a house nationwide is currently £234,742** and three years of university would cost £27,750, it could make for a very secure financial future for some children.
“Admittedly, few people could afford to save this amount of money for their children year in year out, especially if they are also trying to save for their own ISAs – the average Junior ISA subscription according to HMRC is just £1,421*** - but it does give us all something to which we can aspire.”
Three Junior ISA funds that could benefit from other Budget spending:
Among the Chancellor’s spending announcements, substantial amounts of money have been allocated for investment in infrastructure, technology and combatting climate change.
Funds that invest in these themes, and which could be a choice for a Junior ISA are:
This is a high conviction global equity fund that can invest in companies of any size, but will have a bias towards mid-caps. Manager David Harrison focuses on selecting stocks with strong cash generation, but will actively avoid businesses involved in unethical or unsustainable practices. The exclusion criteria included are alcohol, animal testing, armaments, extraction of fossil fuels, gambling, nuclear power, pornography, tobacco and poor employment, environment and/or human rights practices. Each holding will also have to have at least one positive environmental, social or governance attribute. It currently has 10.1% invested in UK companies^.
Investing in Britain's smallest businesses, Liontrust UK Micro-Cap only invests in profitable companies. Each holding in the portfolio must have at least one intangible asset. These include a strong distribution network, high recurring revenues or a strong brand. The team also looks for director ownership of at least 3% of the company. Currently, almost a third of the fund is invested in technology companies*^^.
VT Gravis UK Infrastructure Income invests mainly in investment trusts exposed to different types of UK infrastructure: from hospitals, GP surgeries and schools to railways, roads, wind and solar power. It has an income target of 5% per annum and offers an excellent way to invest in the growing need for infrastructure in the UK. It can invest in infrastructure debt, as well as equities.
*£750 invested each month for 18 years, assuming annual returns of 5%
**Source: Land Registry, December 2019
***Source: HMRC ISA statistics, April 2019
^Source: Fund factsheet, 31 January 2020
^^Source: Fund factsheet, 29 February 2020
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius's views are his own and do not constitute financial advice.