Third of parents planning to take out Junior Isa

MORE than a third of parents with children under 18 say they intend to take out a Junior Isa when the new savings products hit the market on 1 November.

Parents and grandparents will make average annual contributions of £1,117 to each Jisa, at a rate of £93 a month, according to research by JP Morgan Asset Management.

It found that 36 per cent of parents intend to take out a Jisa, with grandparents the next most likely group to contribute.

More than four in ten people claimed they would contribute to a Jisa if one was opened by a relative or close friend, including family members and friends.

Parents expect to pay an average of £1,155 a year into Jisas, more than double the contributions likely to be made by others. But the average Jisa contribution of £1,117 a year falls well short of the £3,600 tax-free limit.

Investing the average contribution over 18 years, assuming annual investment growth of 5 per cent before charges, would build a savings pot of £34,000 by the time the recipient turns 18. However, with the maximum tax-free contribution, that fund would go above the £100,000 mark.

David Barron, head of investment trusts at JP Morgan, said: “The impact of saving £93 per month is significant, particularly when saving in the current environment can be challenging.

“However, if savers are looking to a Junior Isa to fund large future outgoings, such as perhaps university fees, they could consider trying to increase their contributions.”