The top Junior Isa holders have pots worth more than three quarters of a million pounds, data reveals, with more than 50 Jisa holders having wealth of more than £500,000.
Some 370 Jisa holders have pots worth £200,000 or more and a further 280 have pots worth between £150,000 and £199,999, according to a Freedom of Information request made by RBC Brewin Dolphin.
Brewin Dolphin said a young investor could have surpassed £750,000 if they had an annualised return of 32 per cent, with total contributions of £63,436 over 17 years, giving total gains of £697,667.
Saving for a rainy day: Investing your child’s savings could give them a considerably larger pot by the time they reach 18
In order to do so, parents would have needed to open a Child Trust Fund and transferred savings to a Jisa when they were launched in 2011.
Rob Burgeman, investment manager at Brewin Dolphin, said: ‘The annual £9,000 Jisa allowance is less than half of its adult counterpart, and for that reason very few people ever imagined that there might be schoolchildren sitting on pots of £750,000 or more.
Jisas initially came with a £3,600 annual limit, which ahs since been increased to the current £9,000. These accounts allow parents to save money for their child free of tax, with he option to invest via a stocks and shares Jisa.
‘HMRC’s figures, however, underscore the value of long-term planning and the power of compounding.
‘And while not every family will have the means to amass £500,000 by the time their children head off to university, a more modest pot of £50-£100,000 will certainly be within the reach of many,’ Burgeman said.
The number of children with Jisa pots worth more than £50,000 has doubled from 8,130 to 16,420 last year, while those with more than £100,000 has almost quadrupled to 1,910 from 540.
| Pot size | Investor numbers |
|---|---|
| £0-£9,999.99 | 1,663,350 |
| £10,000-£19,999.99 | 132,630 |
| £20,000-£29,999.99 | 47,120 |
| £30,000-£39,999.99 | 22,690 |
| £40,000-£49,999.99 | 13,360 |
| £50,000-£59,999.99 | 6,610 |
| £60,000-£69,999.99 | 3,840 |
| £70,000-£79,999.99 | 2,200 |
| £80,000-£89,999.99 | 1,150 |
| £90,000-£99,999.99 | 710 |
| £100,000-£109,999.99 | 470 |
| £110,000-£119,999.99 | 290 |
| £120,000-£129,999.99 | 220 |
| £130,000-£139,999.99 | 160 |
| 140,000-£149,999.99 | 120 |
| £150,000-£199,999.99 | 280 |
| Over£200,000 | 370 |
| Over£500,000 | 50 |
| Source: RBC Brewin Dolphin | |
Burgeman added: ‘A more modest pot of £50,000-£100,000 will certainly be within the reach of many.
‘Starting at birth, a £50,000 pot could be built by the child’s 18th birthday on contributions of roughly £150-a-month, assuming annualised returns of 5 per cent after charges.
‘Increase the contribution to £300-a-month, and the junior Isa will be looking at a windfall of around £100,000.’
Nevertheless, the vast majority of Jisa holders have far less in their pots, with 1.6million holding below £10,000.
However, by using a stocks and shares Jisa, parents can open the way for considerably higher growth than those using cash Jisas, though they do of course come with more risk.
Based on Brewin’s model, a Junior Isa cash saver with total contributions of £63,436 would only see their pot reach £66,000 over the same timespan.
Burgeman said: ‘This kind of turbo-charged growth simply can’t be generated through patient cash saving.
‘The lesson to be learned is that the stocks and shares Jisa has rewarded investors with far better returns over the long-term than the cash Jisa.’
Children gain full control over Jisas when they reach 18, leading to some parents being concerned that their child won’t be mature enough to manage such a windfall. This may especially be the case for those with pots reaching into the hundreds of thousands of pounds.
In lieu of choosing an alternative vehicle to save for your child, such as a trust, it is essential to make sure that they understand what they need to before gaining access to the money you have painstakingly put away.
DIY INVESTING PLATFORMS
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.