A junior stocks and shares ISA is a great way to save for a child tax-efficiently. But, it can be tricky deciding which investment platform to use. We reveal some of the best junior stocks and shares ISAs
Junior ISAs are a great way to save for a child tax-effiiciently.
Parents, relatives and friends can contribute a total of £9,000 into the account each tax year, and any interest and investment gains are tax-free.
Junior ISAs have grown in popularity since launching in 2011. Like adult ISAs, there are two types of junior ISA: cash ISAs and stocks and shares ISAs.
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According to the latest HMRC figures, £1.5 billion was paid into junior ISAs during the 2022-23 tax year, around 42% of which was in cash. The average subscription was £1,220.
Junior stocks and shares ISAs are often a better choice than their cash counterpart, especially if the child is young.
This is because shares almost always beat cash over long time periods. Parents can open a junior ISA for a baby, and the money can’t be withdrawn until the child turns 18 – giving you a lengthy timeframe. So, you should have time for your child’s savings to ride out any market downturns.
But, it can feel overwhelming trying to work out which junior stocks and shares ISA to open. There are lots of investment platforms to choose from, all with their own pros and cons. Some are particularly cheap, while others may offer more investment choice, or better customer service.
We round up the top junior stocks and shares ISA platforms to help you choose a product that is easy to use and should build up a decent nest egg for your child to spend or save when they reach their 18th birthday.
Best junior ISAs for low fees
As most investors know, the one thing you do have control over when it comes to investing is the amount you spend in fees. Future investment returns are anyone’s guess, but you can reduce the impact of fees eating into your returns by simply choosing a product with low charges.
The cheapest junior ISA will depend on how you want to use it: how much money are you planning to pay in? Do you want to buy funds or shares, and how often do you want to trade them?
To give a flavour of how the costs stack up, we asked Justin Modray, founder of Candid Financial Advice and Compare Fund Platforms, to crunch the numbers for a £5,000 junior ISA containing five funds. Here’s how the annual costs compare for six low-cost junior ISAs (excluding fees for the underlying funds):
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Platform
Annual cost
Notes
Fidelity
£0.00
No junior ISA annual platform fee. £1.50 for deals as part of a regular savings or withdrawal plan, or for reinvestment of income or a dividend; £7.50 for each deal placed online; phone trades are £30 each
Hargreaves Lansdown
£0.00
No junior ISA platform fee or online dealing charges. For share trades over the phone or by post there is a 1% fee (minimum £20, maximum £50), plus foreign exchange conversion fees for overseas shares
Charles Stanley Direct
£15.00
0.3% annual platform fee (min £5, max £50 per month). £4 per fund deal and £10 per share deal, which can be offset against a twice-yearly trading credit of £50
AJ Bell
£20.00
0.25% annual platform charge (max £2.50 for shares), £1.50 per fund deal, £5 per share deal (including investment trusts and ETFs)
Bestinvest
£20.00
0.4% annual platform charge, no fund dealing fees. Annual platform fee falls to 0.2% if using a "ready-made portfolio". Share dealing is £4.95 a trade
Willis Owen
£20.00
0.4% annual platform charge (falling to 0.15% for large portfolios of £250,000+), no fund dealing fees, £7.50 per share deal (including investment trusts and ETFs)
Fidelity and Hargreaves Lansdown are the cheapest in terms of having no annual platform fee (you will need to pay fees on the underlying investments, as you would with most providers). Watch out for fees if buying or selling investments over the phone or by post.
According to Modray, the key for parents when choosing a junior ISA platform is low platform charges along with decent investment choice. It’s also worth checking there are no fees to move the account elsewhere in future, for example, Charles Stanley Direct charges £10 per investment to transfer the junior ISA “as is” (compared to liquidating the investments and transferring the account as cash).
Modray tells MoneyWeek: “Using a junior stocks and shares ISA can be an excellent way to invest for your child’s future. Just be careful to select appropriate investments and keep an eye on charges. If you’re unsure where to invest, low-cost index-tracking funds covering mainstream stock markets would be a sensible starting point.”
Award-winning junior ISAs
While fees are important, you also need to be comfortable with other aspects, such as customer service, and ease of use if you're not an expert investor.
Bear in mind that, while a parent or guardian must open the junior ISA, anyone can pay money into it – just make sure you don’t breach the £9,000 annual allowance.
Boring Money notes that Vanguard is low cost for medium and large-sized portfolios, and a huge global player (a potential downside is it only offers its own funds, not other funds, and not shares).
It highlights Wealthify for being really easy to use, with a great website and design. You can also start a Wealthify junior ISA with just £1.
Boring Money likes Hargreaves Lansdown’s excellent customer service, and its “strong educational content”. However, it notes that while the platform’s junior ISAs are free, “share dealing fees are on the expensive side and the platform charge for fund holders is high”.
Fidelity was commended for its investment research tools, while Nutmeg was praised for being a “decent option for less confident investors or those who find investing a bit baffling and could do with a helping hand”.
Boring Money points out that Nutmeg offers a “wide range of different investment approaches” and that “Chase banking customers will like the integration”. Nutmeg and Chase are both backed by JPMorgan.
What are the main junior ISA rules?
If you’ve set up a junior ISA and want to switch to a competitor – perhaps to reduce the fees, or get a better user experience or investment range – go for it!
Parents are allowed to move the junior ISA to a different provider, just watch out for any exit fees (there could be a charge to transfer a stocks and shares account “in-specie”, in which case consider converting to cash first).
You can also move a child trust fund (CTF) into a junior ISA, which could significantly cut your fees and increase your investment choice, as CTFs are now considered old, legacy products.
As mentioned, the annual allowance is £9,000, and you can split this across a cash junior ISA and stocks and shares junior ISA. So, you could contribute £2,000 to a cash junior ISA, while up to £7,000 is paid into a stocks and shares account, in a single tax year.
Bear in mind that a child can only hold one cash junior ISA and one stocks and shares junior ISA.
The £9,000 limit is on top of the £20,000 allowance that adults have for their own ISAs.
The cash inside the junior ISA belongs to the child and cannot be withdrawn until they turn 18, although teenagers can take control of the account from age 16.
Children aged 16 and 17 can also open their own junior ISA.
At age 18, the junior ISA passes automatically to the teenager, meaning they can spend, save or invest it as they please.
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Ruth is an award-winning financial journalist with more than 15 years' experience of working on national newspapers, websites and specialist magazines.
She is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times.
A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service.
Outside of work, she is a mum to two young children, while also serving as a magistrate and an NHS volunteer.
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