Best Junior Stocks & Shares ISA Platforms To Hold Your 2020-21 Allowance
As of this tax year the 2020-21 Junior ISA allowance is £9,000.
This is great news for parents or grandparents wanting to invest for a loved ones future. This is an increase from the previous years allowance of £4,368. This blog reviews some of the best UK platforms for investing through and the main things to consider.
The Best Junior Stocks & Shares ISA Platforms To Hold Your Child's 2020-21 Allowance
Under current rules to qualify for a junior ISA (JISA) the child must be under 18 and living in the UK. The exception to the latter is if the child is living outside the UK as a result of the parents diplomatic or armed services work and depend on the parent for care.
There are two types of junior ISA: Cash junior ISAs - where any interest accrued is not taxable; Stocks & Shares Junior ISAs where money is invested and no tax is payable on any capital gains or dividends recieved. This article focuses on parents who are considering opening a junior stocks and shares ISA.
How To Choose The Right Home For Your Child's Junior Stocks & Shares ISA?
In considering an investment platform for a junior 2020-21 investment ISA, the following should rank highly in your decision process:
- Cost - Picking the “cheapest” is not as clear cut as it sounds, as each DIY platform has its own policy on costs and how these are broken down making like for like comparison challenging. If you know what you are going to invest in for your child this makes the process a lot easier e.g. ready made investment portfolios. Most investment platforms charge an annual platform fee which is charged on the investments held.You may be considering a platform for your own investments as well so your own objectives may also come into the equation.
- Functionality - You may wish to keep things simple and most platform providers offer this. For those who are looking for more, todays platform providers are investing heavily in better functionality for their clients as they know that keeping you as a loyal customer is key to the future success of their business. As well as investment research and analysis tools, some providers offer webinars on trading strategies and market trends to help you in your decision making. Access to global markets is now fairly standard, and the ability to trade in different currencies. Fund "best buy" recommendations are either done inhouse e.g. Hargreaves Lansdown who have their own investment experts, or through independent investment commitees such as Interactive Investor who use both inhouse staff and fund analysts and external financial journalists to come up with their choices. Mobile apps are increasingly becoming important with providers investing in improving functionality in helping to keep clients engaged.
- Tax wrappers offered - Not all platforms offer a junior ISA.
- Investment choice - Choice is great but be realistic on what you actually need. A number of fund DIY platforms offer model portfolios making it easier for you to invest for your child based on your risk profile and timeframes.e.g. Fidelity offer a fund selection tool called pathfinder which helps you choose funds based on a risk profile from 1 to 5, the amount you wish to invest and timescale.The tool then gives you an estimate based on poor, average, good market conditions over your selected time frame what you investment might be worth at the end of the term.You can decide on how you want your money to be managed; either on a "expert focus" where your money is spread across a best of class fund managers or a "cost focus" where your money is invested across global markets whilst keeping costs down.
Our Top 5 Junior ISA Stocks & Shares ISA Platforms:
1. Hargreaves Lansdown - One of the largest platform providers in the UK with £85 billion under management. Not the cheapest with an annual management charge of 0.45% but have a large choice of funds (3,000+), including access to ETFs, investment Trusts. There is online and mobile app share dealing at £5.95 per deal for UK and overseas shares.If you are short of inspiration you access their investment ideas for 2020 for your child's JISA.
2. Interactive Investor - ii offer a fixed fee service so if you already have an account with them you can add a JISA for no extra fee. If ethical investment is important to you ii have a good list of investment options. Currently ii offer a free credit for share dealing within a JISA.
3. Fidelity - Are a global investment manager founded 50 years ago. You can open a junior ISA from £50 pm or invest a lump sum from £1,000. Fidelity apply a annual service charge of 0.35% on investments under management. As well as providing tools to research your own investment selections, Fidelity offer picks from their inhouse expert, selected favourite ETF funds, and their top 50 funds across different sectors.
4. AJ Bell - Offer a large range of investment opportunities for your child's ISA. You can go it alone or let AJ Bell do the hard work for you. They offer pre-built portfolios with different investing goals.The annual platform fee is a competitive 0.25% pa. Share trading costs range from £4.95 to £9.95.
5. Wealthify - Backed by AVIVA Wealthify offer low cost investing from £1 pm. Winner of the 2019/20 Personal Finance Awards for "Best Junior ISA". They offer 5 investment styles from "Cautious" to "Adventurous". You can select ethical funds which have a blend of environmentally and socially responsible investment objectives. You can track performance via their app. The annual service fee is 0.60% pa. There is no direct share trading option with this service.
Top 10 things to consider:
1. Do you know already the investments you want to invest in for your child?
A number of platforms provide ready made portfolios for junior ISAs or have selected funds to make your life easier based on set objectives. However you may want to trade shares only. In this case a platform that offers low cost dealing fees may be a priority. A number of platforms offer advanced research trading tools to entice you to them e.g. Level 2 with options to hold and trade in different currencies.
If you are more interested in collective funds then this again may determine who you go with. Charging structures for funds held on the platform will vary. Over time the impact of such charges can be significant.
2. Are you a true DIY investor or do you prefer to have someone else do it for you?
Not everyone has the time or inclination to manage their own or their child's investments. Your answer to this will depend on:
- How confident are you about investing?
- Will you enjoy getting underneath the bonnet?
- Do you have enough time to be an active manager?
- Would you mistrust someone else making these decisions on your behalf – or have more confidence in their market knowledge than your own?
3. Do you want to invest just in funds, or shares and funds?
Check what’s on offer, if you want to have the flexibility: some platforms don’t offer both.
4. Do you want your platform to be independent or fund-owning?
Do you want to be able to invest in independent funds, or are you happy investing via a platform provider such as Legal & General that offers just its own funds?
5. Do you wish to use the platform for your own investments as well?
You may want to look for a platform that can manage your investments. For example platforms can hold direct investments as well as , can accept ISA transfers from other providers, Pensions e.g. self invested personal pension or SIPPs.
6. Do you want to do a lot of trading?
Active investors will want to look for a platform that offers the best research, and the lowest fees for volume trades in funds, and stocks and shares. See a list of sharetrading DIY platforms for your ISA here.
7. How easy is this DIY platform to use: what kind of tools and customer service does it offer?
These are often the criteria that count most highly with users, so do some research and read the reviews.
- Many investors are prepared to pay a bit more in fees for a platform that offers really useful apps and services.
8. How much are you investing?
If you have existing junior ISAs these can be transferred into the platform if you wish. You may also have investments you hold for your child that sit outside an ISA. The fee structures platform to platform vary.
- Platforms that charge flat-rate fees typically work better for large investors with £50K or more in their portfolios.Interactive Investor are one of the few fund platforms that work on a fixed flat monthly fee basis, currently £9.99 pm
9. How has this platform performed?
This is a key consideration if you’re looking at having your investment managed by the platform, rather than going DIY.
You’ll want to look at the kind of returns that its investors have been getting: read the reviews and compare the results of the platforms you’re considering.
10. And finally… how much will it cost?
If you’ve worked through the other decision criteria first, you’ll understand that you shouldn’t choose solely on cost. However ultimately cost is often what drives our decision making.
Some of the more expensive platforms are highly rated by their clients for usability and client support, or show consistently good returns.
Interactive Investor operate on a flat fee basis charging £9.99 pm. Fidelity, Hargreaves Lansdown, AJ Bell for example, charge tiered account management fees which are higher than others, but they’re rated highly by investors for ease of use and good customer support. Based on how much you are looking to invest this may sway your decision. Fidelity fund supermarket offer the same service fee across all your investments.
- Choosing active management of your investments isn’t always cheaper than DIY: there are some price advantages to trading in scale.
- There has been a push to get platforms away from commission-based charges towards “clean pricing” annual fees.
- You need to be looking at annual administration charges, dealing fees, and any other costs, including exit charges.