17 min Read
21 Mar 2017

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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Best Junior stocks and shares ISA

Best stocks and shares Junior ISA provider (& best Junior Cash ISAs)

best stocks and shares junior ISA

Find the best stocks and shares junior ISA

Most parents are keen to give their children the best start in life and saving for their future can play a big part in their plans. Investing in a Junior ISA can provide a tax efficient way of building up a lump sum to give your children a great start on their journey into adulthood. But a Junior ISA doesn't have to mean a savings account paying a low interest rate. In fact you can also invest in the stock market via a Junior stocks and shares ISA.

In this article we explain everything you need to know about and compare Junior ISAs. However, you can jump straight to the best buy Junior ISAs by click on the links below:

What is a Junior ISA?

A Junior ISA is a long term tax-free savings account designed to provide a lump sum for a child when they reach the age of 18.

There are two types of Junior ISA:

  • Cash Junior ISA - where the money is held in cash and interest is added during the term
  • Stocks and shares Junior ISA - where money is invested in equity markets with the aim of obtaining a better return at the end of the term. It is possible to invest in assets other than equities too, such as bonds or funds with a mix of assets.

How much can you invest in a junior ISA?

In the tax year 2016/17 the maximum that can be invested in a Junior ISA is £4,080 per child and any previously unused Junior ISA allowance can not be carried forward into a subsequent tax year. The Junior ISA allowance is not fixed and can change from tax year to tax year. In the 2017/18 tax year the annual Junior ISA allowance will rise to £4,128. Junior ISA contributions can only be made until the child reaches their 18th birthday.

Who can set up a Junior ISA?

A Junior ISA can only be opened by parents or guardians with parental responsibility for the child.

Who can contribute to a Junior ISA?

Once a Junior ISA is open anybody can contribute, including grandparents.

What is the difference between a Junior ISA or a Child Trust Fund?

A Child Trust Fund is a long term savings account for children and whilst contributions can still be made to existing Child Trust Funds news accounts were stopped in 2011 and replaced by Junior ISAs. After the Government contributions to Chid Trust Funds were stopped the number of providers, investment fund availability and interest rates dropped on these products. Originally money in a Child Trust Fund could not be transferred to a Junior ISA, stopping millions of parents from enjoying the better investment options and interest rates available via a Junior ISA. However this rule changed in 2015 and parents can now transfer existing Child Trust Funds into a Junior ISA. To transfer a Child Trust Fund to a Junior ISA you simply need to choose a Junior ISA and note the request on your application.

What happens to a Junior ISA when a child reaches 18?

A Junior ISA matures when the child reaches the age of 18 and the proceeds are either paid to the child or transferred into an adult ISA for them.

Why should I consider a Junior Cash ISA or Junior Stocks and Shares ISA?

If you are trying to build up a sum of money to provide for your child as they enter adulthood then the tax free status of a Junior ISA is a great investment vehicle. If you start investing/saving when your child is young the greater the eventual value is likely to be when your child reaches age 18. In addition, you can open a Junior ISA from as little as £1 for a Junior Cash ISA or around £20 for a Junior Investment ISA.

The one disadvantage of using a Junior ISA to save for your child's future is that they are entitled to the proceeds once they reach the age of 18, whether you want them to get their hands on it or not and you have no control over how they spend the money. For most people that isn't a problem. However, if you are concerned about it then you could save via a normal ISA in your name and then gift the money to the child when you want to. Of course this does mean that you use up a portion of your own annual ISA allowance in doing so. We provide a separate roundup of the best cash ISAs and the best Stocks and Shares ISAs.

Junior Cash ISA VS Junior Stock & Shares ISA - pros and cons

 

Type of Junior ISA  Pros Cons
Junior Cash ISA Capital is not at risk as money is held in cash Poor savings rates which limits growth
Junior Stocks & Shares ISA Prospect for much greater growth by investing your money Higher charges, Capital will rise and fall with investment markets

With current interest on cash savings at an all time low it makes sense to look at ways of improving the return on your investment. Investing in equities has proven over the long term to outperform cash savings. Equity based investments have averaged around 5% return a year. That is in no way guaranteed and you could end up with less money than you originally invested. However, the longer your investment timeframe the more likely you are to make a profit.

Saving into a Junior ISA does not have to mean investing in individual stocks and shares, which can be very risky. You can instead invest in investment trusts and funds which are basically a basket of shares bought to reflect the investment aims of the investment trust's mandate. Investing in investment trusts/funds can help create a balanced portfolio, therefore reducing the risk level of your investment.

The Best Junior Cash ISA rates

The table below shows the best-buy Junior Cash ISAs right now:

Junior ISA Provider Junior ISA AER interest rate
Coventry BS 3.25%
TSB 3.00%
Tesco Bank 3.00%
Danske Bank 3.00%
Darlington Building Society 3.00%
Halifax 3.00%
Nationwide 3.00%
Wesleyan Bank 2.75%
Santander 2.75%
Mansfield Building Scoiety 2.55%
Lloyds Bank 2.50%

The Best Junior Stocks and Shares ISAs

Overall Best Junior Stocks and Shares ISA provider

Charles Stanley Direct

  • no fund dealing charge
  • low annual charges
  • choose from over 1,500 funds and OEICs
  • invest in shares, ETFs and much more
  • invest from £50 per month or£500 lump sum
  • maximum platform charge of 0.25% of holding

Best Junior Stocks and Shares ISA provider for tools and functionality

Hargreaves Lansdown

  • information rich website packed with fund information and commentary
  • useful smartphone app and tablet app
  • winner of numerous awards for stocks and share Junior ISAs
  • choose from over 2,500 unit trusts and OEICs
  • invest in shares, ETFs, and much more using their low-cost stockbroking service
  • invest from as little as £25 per month or £100 lump sum
  • 0.45% maximum annual platform charge

Best Junior Stocks and Shares ISA for low monthly payments

Best Stocks and Shares Junior ISA for low annual charges

Best Junior Stocks and Shares ISA for low dealing charges

Cheapest Stocks and Shares Junior ISA for most people

Charles Stanley Direct

  • no fund dealing charge
  • low annual charges
  • choose from over 1,500 funds and OEICs
  • invest in shares, ETFs and much more
  • invest from £50 per month or£500 lump sum
  • maximum platform charge of 0.25% of holding

Compare Junior stocks and shares ISAs

Here is a comparison of the charges of the leading Junior Stock and Shares ISAs

Provider Minimum investment Annual charge Dealing charge
Charles Stanley Direct £100 lump sum or £50 per month 0.25% Nil for funds
AJ Bell Youinvest £25 lump sum or per month 0.25% £1.50 per deal online
Hargreaves Lansdown £100 lump sum or £25 per month 0.45% Nil
Bestinvest £50 lump sum or per month 0.40% Nil
Fidelity £500 lump sum or £50 per month £25 pa flat fee Nil
Interactive Investor £20 lump sum or per month £80 pa 8 free trades pa then £10 per trade

When comparing Junior stocks and shares ISAs you need to decide where you want to invest, either in funds or stocks and shares.

Funds

Most investors choose funds as they invest in a basket of stocks, shares, bonds and other investments in line with the investment aims of the chosen fund. Actively managed funds have a fund manager who chooses the underlying investments whereas a passive fund will just broadly reflect an index such as the FTSE 100. Whichever you choose it is preferable to pick a stocks and shares Junior ISA with low charges as shown above. The underlying funds you invest in will levy their own charges but these are fairly consistent across all the Junior ISA providers.

Shares

If you are looking to invest directly in stocks and shares then this will limit your choice in terms of the best Junior stocks and shares ISA for your circumstances. Some Junior stocks and shares ISA providers do not offer the stockbroking facilities required to buy shares directly. It must be noted that investing directly in stocks and shares is a riskier investment strategy and while this may prove profitable the risk of losses are greater.

There are a number of other things you need to check when choosing a Junior stocks and shares ISA.

Customer service

There has been an mini-explosion in recent years in new Junior ISA providers and this has resulted in a variety of offerings from these new providers. To keep costs low, and attract new customers, some Junior ISA providers are offering a stripped back level of customer service, which may not meet your requirements, so make sure you check the offering carefully before investing.

Tools and research

You may want to keep an eye on your investments on your smartphone or read some up to date investment research. This could dictate the provider you choose. The tools and research offered vary greatly across the various Junior ISA providers so check these out to make sure they offer what you are looking for.

Charges

There are a host of charges that Junior ISA providers levy and the level of these charges can impact your investment returns over time.

These charges can include:

  • transfer charges
  • dividend reinvestment fees
  • buying charges
  • selling charges
  • fund switch charges
  • bid/offer spread
  • fund manager charges
  • platform charges
  • transfer out fees

List of Junior Stocks and Shares ISA providers

Cavendish Direct

  • basic but competent service
  • choose from a wide range of funds
  • invest from £50 per month or £500 lump sum
  • 0.25% annual fee, no dealing charges
  • offers 3 model portfolios graded by risk
  • good choice if you want to invest in funds only and keep costs low

Hargreaves Lansdown

  • information rich website packed with fund information and commentary
  • useful smartphone app and tablet app
  • winner of numerous awards for stocks and share Junior ISAs
  • choose from over 2,500 unit trusts and OEICs
  • invest in shares, ETFs, and much more using their low-cost stockbroking service
  • invest from as little as £25 per month or £100 lump sum
  • 0.5% maximum annual

Interactive Investor

  • choose from 3,700 funds
  • invest from as little as £20 per month
  • £20 quarterly fee but this is offset against trade costs
  • standard £10 dealing charge

AJ Bell Youinvest Junior ISA

  • choose from 2,300 funds
  • invest from as little as £25 per month or £500 lump sum
  • annual charge of 0.2% on fund holdings
  • fund dealing charge of £4.95
  • good for regular investors
  • no annual fee

Charles Stanley Direct

  • choose from over 1,500 funds and OEICs
  • invest in shares, ETFs and much more
  • invest from £50 per month or£500 lump sum
  • maximum platform charge of 0.25% of holding
  • no fund dealing charge

Alliance Trust Savings

  • wide range of investments including funds, investment trusts, UK equities and ETFs
  • quarterly charge of £10 (waived for 2015)
  • investment from £50
  • £12.50 dealing charge

BestInvest Junior ISA

  • choose from over 2,500 funds, ETFS and UK listed equities
  • invest from £50 per month or £100 lump sum
  • 0.4% annual fee
  • no fund dealing charges, £7.50 share dealing charge

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