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Can I stop my son getting hold of his Junior Isa cash at 18?

My wife and I are ready to start a savings pot for our toddler son which we will put money in to each month, alongside birthday and Christmas cash.

We’re keen on a stocks and shares Junior Isa, but there are a few things we’re unsure about – especially when it comes to him growing up and getting hold of the funds. 

Ideally, we would like to keep the money from him until he is older than the age of 18, when the funds are usually released. 

Stocks and shares Junior Isas are offered by insurers, investment managers and wealth managers

The extra returns will be beneficial, plus I remember what I was like at 18 – I would have been much better with it in my mid-20s.

I know it turns into an adult Isa when he’s 18, but how does a provider alert him to the money? Is it just a case of writing a letter, or would they go to greater lengths?

Secondly, if I can keep it from him, can I continue to add to his adult Isa? Let’s say we kept going until he’s 23 – so an extra five years. 

I know we can have a grown-up conversation with him about the money as he nears adulthood, but I like to have all bases covered.

Lastly, can you recommend a good stocks and shares Junior Isa provider? I’m looking for low fees and good customer service, alongside steady returns. Via email

Ed Magnus of This is Money replies: Setting up a Junior Isa (Jisa) can be a great way to build a nest egg for your children, giving them a leg up as they begin adult life.

Jisas can be opened for any under-18 living in the UK, and parents can contribute up to £9,000 each tax year.

For a stocks and shares Jisa, any dividends or capital gains will be tax-free. 

However, there is one major consideration before getting started. 

The child can take control of the account when they’re 16, and withdraw the money when they turn 18.

More than 90 per cent of 18-year-olds roll their Jisa into an adult Isa, according to analysis by wealth manager Hargreaves Lansdown, and the vast majority still have some of the money invested a year later.

Most parents will be hoping the money remains invested, or at least used towards something sensible such as a deposit for a property, or tuition fees.

However, parents must accept that they ultimately won’t have the final say on how the funds are spent.

Our reader won’t be alone in fearing their son might, aged 18, be a little impulsive when it comes to money management and financial planning.

To help in answering their questions we spoke to Rob Morgan, chief analyst at investment management firm, Charles Stanley and Laura McLean, chartered financial planner at The Private Office.

Can parents hide a Jisa from their child?

Rob Morgan replies: It’s possible to keep it a secret up until age 18 – but after that it becomes more difficult.

When Jisa accounts are opened with Charles Stanley, it asks for the name and date of birth of the child. 

However, as a young child would not have a phone number or email address, they would not have any knowledge of the account unless informed by the adult.

However, on maturity at age 18, the Jisa is converted into an ordinary Isa in the child’s name, and the connection with the adult is severed.

Children with a Junior Isa can save in to it themselves past the age of 18, but it will be converted into a regular Isa. They can also give their parents permission to keep managing it

Children with a Junior Isa can save in to it themselves past the age of 18, but it will be converted into a regular Isa. They can also give their parents permission to keep managing it 

Can they pay in when their child is over the age of 18?

Rob Morgan replies: After the child turns 18, subsequent changes cannot be made to the account until they register their details. 

All direct debit payments into the account cease, as well as any monthly investments. These would need to be re-established by the child if required.

However, the adult can continue managing the account, and paying in money, upon completion of a ‘third party authority’ form.

This allows the adult to have visibility over, and control of, account activity, so long as the child grants it.

However, this does mean that keeping the account a secret beyond age 18 isn’t possible unless it is kept ‘dormant’ without the child’s full details being added and no contributions or changes being made. 

How will providers contact the child?

Laura McLean replies: Typically the Jisa provider will contact the child ahead of their 18th birthday, to outline the options and to sign an Isa declaration.

This is a chance to review the plan to check it is invested in line with your son’s own attitude to risk, objectives and investment preferences.

Many providers lock the account until a declaration is signed, therefore you wouldn’t be able to continue managing the account on his behalf.

As you say, prior grown-up conversations around spending and managing finances are important, and getting your son engaged about where it’s invested early on may encourage him to use the funds wisely once he is able to. 

What stocks and shares Jisa provider is best?

Laura McLean replies: If you are looking for a steady path of return, a low-equity portfolio should reduce volatility. 

However, with at least 15 years until your son will access the funds, there is time to weather bumpier market movements and perhaps take a higher-risk approach.

For low-cost, direct client stocks and shares Jisas, Fidelity offers a wide range of investment options and does not take an ongoing service fee.

The only fees will be the underlying investment costs, dependent on the strategy chosen. 

AJ Bell Youinvest offers another low-cost Jisa, with an 0.25 per cent ongoing service fee and charging £1.50 per trade.

Ed Magnus replies: If you’re looking for the most cost-effective way to invest you may wish to consider online DIY investing platforms, as many of these now include the option to invest in a Junior Isa.

When weighing up the right one for you, it’s important to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.

This is Money has written an extensive guide on the best and cheapest DIY investing platforms, which might help you decide.

How a Junior Isa could net your child £1.67m 

Parents with plenty of money to save each year have been handed the option to make their child a ‘millionaire baby’ thanks to the increased Junior Isa allowance of £9,000.

Parents and grandparents who could contribute that much each year would leave their child with a £275,000 windfall at 18, assuming a return of 5 per cent a year on the investments held in the account. This is according to calculations from wealth manager The Private Office.

If they left the money in an adult Isa at 18 and didn’t touch it at all, this would result in a pot of £1.67m at age 55, assuming the same return. 

And that’s without adding any more money. If the child or parents did continue to save into the account, it could be worth much more. 

What should parents invest in?  

Once you have chosen which platform or provider to use, the next task is to choose what to invest in.

Many of the investing platforms allow customers to invest in a large range of funds, investment trusts and individual stocks and shares – although the range of choice varies between providers.

For those who would rather not have to make any decisions themselves, there are also options that mean they won’t have to make a choice.

Online investment management services like Nutmeg, Moneyfarm and Wealthify will invest on your behalf in accordance with your personal risk profile.

You can control a Junior Isa from an app on your phone and change your risk profile as and when your circumstances require.

Nutmeg and Wealthify investors can choose between a range of management plans. 

Taking into account the management fees and fund costs, Junior Isa savers could expect to pay between 0.72 per cent and 1.14 per cent with Nutmeg and either 0.76 or 1.3 per cent with Wealthify.

Moneyfarm investors can typically expect to pay 0.97 per cent in fees for its standard service. 

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