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What could the new Junior ISA limit mean for children investing in investment companies?

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12 March 2020

£9,000 invested each year in the average investment company over 18 years would be worth £464,413.

The annual savings limit for Junior ISAs (JISAs) was given a big boost in yesterday’s Budget, with the amount family and friends can invest for children each year more than doubling from £4,368 to £9,000.

New data from the Association of Investment Companies (AIC) reveals what a big difference such a change can make over the long term.

£9,000 invested in the average investment company 18 years ago would have grown to be worth £44,700 at the end of February versus £21,844 if the current £4,368 limit had been invested.

The difference is even greater if the £9,000 had been invested in the top-performing investment company sector over the period, Country Specialist: Asia Pacific ex Japan, which would have turned it into £78,774.

For savers who could have made a £9,000 investment over each of the last 18 years in the average investment company, a total investment of £162,000, their child’s nest-egg would be worth £464,413, a life-changing sum.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Some lucky children were given a big savings boost in the Budget, with the annual Junior ISA (JISA) allowance more than doubling to £9,000. With their strong long-term performance, investment companies are well worth considering when saving for children. £9,000 invested in the average investment company 18 years ago would be worth nearly £45,000 at the end of February, enough to give a child a major head-start in life.

“Parents may be worried about the recent market volatility but over the long term stock market investments can really pay off. Young people are facing tough financial barriers, whether it’s paying for further education or getting on the housing ladder and investment companies can be a big help over the long term.”

Top performing investment company sectors over 18 years

AIC sector

£4,368

lump sum invested

06/04/2002

to

29/02/2020

£9,000

lump sum invested

06/04/2002

to

29/02/2020

£4,368

invested annually (£78,624 invested)

06/04/2002

to

29/02/2020

£9,000 invested annually

(£162,000 invested)

06/04/2002

to

29/02/2020

Weighted average investment company (ex 3i ex VCTs)

£21,844

£44,700

£225,395

£464,413

Country Specialist: Asia Pacific ex Japan

£38,494

£78,774

£277,030

£570,803

Asia Pacific Smaller Companies

£34,820

£71,256

£271,928

£560,292

UK Smaller Companies

£32,769

£67,058

£294,206

£606,193

Global Emerging Markets

£32,559

£66,628

£235,150

£484,513

Private Equity

£29,414

£60,191

£252,558

£520,380

Biotechnology & Healthcare

£27,413

£56,098

£367,193

£756,578

Global Smaller Companies

£26,333

£53,888

£278,087

£572,981

UK All Companies

£25,185

£51,539

£229,851

£473,594

Asia Pacific

£25,025

£51,210

£228,697

£471,216

Global

£22,139

£45,306

£237,612

£489,586

Europe

£19,962

£40,850

£205,170

£422,740

Global Equity Income

£18,814

£38,500

£202,638

£417,522

North America

£17,466

£35,742

£242,993

£500,673

Flexible Investment

£14,747

£30,177

£153,744

£316,779

UK Equity Income

£14,364

£29,395

£170,670

£351,655

Japan

£13,610

£27,850

£181,838

£374,666

Japanese Smaller Companies

£11,878

£24,306

£186,928

£385,155

Source: AIC/Morningstar. Performance is share price total return to 29 February 2020. Annual investments are on 6 April in each sector annually from 2002 to 2019.

For more information on saving for children with investment companies, visit the dedicated page ‘Saving for your children’s future?’ on www.theaic.co.uk which has six tips on saving for children, as well as a video, guide and jargon buster.

-Ends-

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Notes

  1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 362 members and the industry has total assets of approximately £196 billion.
  2. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.
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