More families than ever before are putting the maximum amount in their children’s JISAs. The most recent available data from HMRC revealed that 70,550 Junior ISA (JISA) accounts maximised their annual allowance in the 2022/2023 tax year, a surge of 45% compared to the prior year.
What’s more, the country’s 50 largest JISA accounts contain an average of £761,000, putting these children on track to become millionaires in their twenties – as RBC Brewin Dolphin discovered by making a freedom of information request to HMRC last year.
Daniel Hough, financial planner at RBC Brewin Dolphin, said: “It is highly encouraging to see more people maximising the use of their annual JISA allowance to support the next generation of their families.
“While the doubling of the annual allowance had a big impact on the number of people able to maximise it each year, it looks as though more people are finding the means to do so and pass down as much of their excess income or wealth as possible”.
Number of JISA accounts reaching annual limit
Source: HMRC
Even modest JISA contributions can build significant wealth on a child’s behalf. Parents and grandparents making combined monthly contributions of £150 would build a JISA pot of around £50,000 by junior investors’ 18th birthday, while contributions of £300 per month would lead to a £100,000 pot.
However, Hough said large discrepancies between years with similar allowance limits indicated that many families are struggling to consistently maximise their children’s JISA allowance. Grandparents are the main contributors to JISAs through annual gifts of £3,000 or other one-off donations, he said, but it can be challenging for families with multiple children to fund all their JISAs.
Additionally, some parents may be concerned about their children having unrestricted access to hundreds of thousands of pounds as soon as they turn 18. Junior self-invested personal pensions (SIPPS) are an appealing alternative that allow parents to pass down wealth, “with the peace of mind that your child or grandchild won’t take control of them until they retire”, he pointed out.