Home » Junior ISAs get off to a good start, says the AIC

Junior ISAs get off to a good start, says the AIC

Junior individual savings accounts (JISAs) have been reported to have had a slow take-up, possibly reflecting the lack of government contributions and difficult and unstable economic environment.

The Association of Investment Companies (AIC) states that according to investment company managers, investment company JISAs have had a good first year on November 1st.

A breakdown of popular funds shows that investment company JSAs are holding up quite well.

According to JP Morgan Asset Management, seven out of the ten most well-known JISAs on its online platform, WealthManager+ (which also includes third party funds) are investment companies. 

Alliance Trust Savings’ platform also has 46 per cent of all JISAs (excluding cash) in investment companies.

Over the last unpredictable year to September 30th, equities have withstood the tougher moments and held up relatively well, with investment companies reporting positive gains of six per cent on average.

A £3,600 investment 18 years ago to September 30th, 2012 in a typical investment company would have risen to £13,012.

Yearly investments of £3,600 in the same period would have grown to £144,508.

Communications director at the AIC, Annabel Brodie Smith explained that it is “encouraging” to see investment company JISAs holding their own platforms.

Investment companies are well-suited to saving for children due to the long-term growth potential of the stock market while offering ample time to ride out the highs and lows.

They are worth considering also because they have the capability to gear in order to enhance returns, have a close ended structure to allow managers to take a long-term view and have an independent board to represent shareholder interests, stated Ms Brodie-Smith.

Garry Mcluckie, marketing director of Alliance Trust Savings says that the take-up of JISAs had exceeded expectations during the last 12 months and it is anticipated that this will continue in future as parents and grandparents seek to secure their children’s futures.

46 per cent of all assets (excluding cash) held in JISAs on the Alliance Trust Savings Platform are held in investment trusts, signifying a genuine understanding from customers of the value of longer-term investing in lower cost assets.

Mr Mcluckie believes the Government could do more to support the take up of JISAs. He urges it to revisit the regulations around Child Trust Funds and permit these investments to be moved across to JISAs.

This would “ensure a generation of children are not locked into defunct products that no provider is prepared to invest in, bringing about the very real prospect that these investments are left to wither on the vine and leave investors seriously disadvantaged,” said the managing director.

Head of manager selection at Fidelity Worldwide Investment, James Bateman mentions the types of funds parents could consider.

The manager points out JISAs are intended to be very long-term investments and because of this they are “great”, however parents might like to consider higher risk funds, specifically equities over fixed income.

James Saunders Watson, head of marketing in Investment Trusts at JP Morgan Asset Management, explained that families have realised that longer-term investments for younger children means the possibility to take more risk than they normally would.

Peter Christopher

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