Thousands of Child Trust Funds are maturing in September and many of those turning 18 are set to reap considerable rewards. Although CTFs are no longer available (but you can continue to invest in them), Junior ISAs are a smart replacement, and again highlight the advantages of saving over the long term.
Simulated future performance numbers should not be relied upon as an indicator of future performance.
The illustration above shows the potential portfolio value for a JISA portfolio that is contributed to for 18 years, with the white line representing the average return scenario from a Netwealth Risk Level 7 portfolio. The net projected rate of return in this case is 5.5% per annum.
A JISA could also prove to be a smart route to help mitigate inheritance tax issues. For example, contributions to JISAs by parents could be counted as regular gifts out of excess income and so the capital would be outside of their estate for inheritance tax purposes immediately. Contributing £9,000 to a JISA for 18 years would therefore remove £162,000 from your estate and save up to £64,800 in inheritance tax.
Remember, like all ISAs your annual allowance must be used each year, or it is lost. If possible, you should fund your JISA at least partly each year so you don’t lose that allowance for good.