A Stocks and Shares Junior ISA could net children 43 percent more, than if the Junior ISA was simply put into a bank or building society cash ISA. The research from the Investment Management Association, indicates that investing the Junior ISA allowance into a FTSE 100 tracker fund could well prove to provide far greater returns.
The findings are based on a forecast of investing £50 per month over 18 years. It is claimed that the return from a FTSE 100 tracker fund could return £20,463(based on 2% inflation and 0.5% charges) and a cash ISA could provide a real return of 1% or £14,303 (accounting for 2% inflation).
Commenting, Richard Saunders, Chief Executive of the IMA, said:
“Equity markets have been choppy in the last few years, but a longer term perspective shows that over time equities have outperformed cash. Based on average returns over the last 110 years, eighteen years of steady investment in an equity fund would have resulted in 43% more than investing in cash.
“Junior stocks and shares ISAs incentivise parents to provide strong financial support to their children. With a potential savings pot of £20,000, parents can contribute to a child’s university education, fund a gap year, place a deposit on a house or save for a rainy day.”