If you hold a Junior ISA (JISA), when you turn 18 you will be able to access the money held in the account. There will be a number of important decisions for you to make about your JISA, including what to do with the money held in it. It is important you understand the various options available to you as you reach this milestone, to help you decide which might be the best one for you.
What is a Junior ISA (JISA)?
Junior ISAs are savings accounts specifically designed for children. These accounts are a tax-efficient way to save for a child's future. You will likely have had a parent or grandparent saving into the JISA on your behalf since your birth so, depending on the amount saved, how long for and the performance of the investments, you may have a sizeable investment account.
Before you are 18:
— Neither you nor anyone else can usually access the money held in the JISA, unless you become terminally ill or pass away before you are 18.
— Once you turn 16, although you cannot withdraw money from it, you can choose to apply for our consent to become the ‘registered contact’ of the account. If you do so, you will become the only person that can be contacted about the JISA account, and only you can make account holder decisions about how your investment is administered.
After you turn 18:
— When you turn 18, your JISA will be deemed to be an adult ISA account; however, it will not automatically be transferred into an ISA portfolio. Your investment funds will remain in an unmanaged JISA account unless you apply for an adult ISA or send instructions to close the account.
— You will automatically become the registered contact and the person who set the JISA up for you will no longer be able to administer the account on your behalf.
You will have a number of options available to you at 18, including the following:
1. Keep the money in your ISA account
Once you have completed an application to convert the JISA to an ISA, you can choose to keep your money invested in the ISA and it will stay actively invested on your behalf. You will be able to add additional savings up to a maximum of £20,000 per year into the ISA. An ISA has ‘tax shelter benefits’, meaning that you do not pay any tax on the income that you receive e.g. dividends and interest in the ISA or any capital gains tax (CGT) on any growth. This means they are a good option for savings that you want to grow over time – with the added benefit of being accessible; you can take the savings out of an adult ISA at any time.
2. Withdraw the funds and transfer them into a current account
You can sell your investments and withdraw money from a stocks and shares ISA without paying tax on the withdrawal. If you choose to place the funds into your current account, it is advisable to think carefully about whether having easy access to the money means you may be more likely to spend it. It is also worth ensuring you understand the rates available from the banks and any restrictions on withdrawals.
3. Withdraw the funds and spend them
While this is an option, it may not be the most financially responsible choice. It has likely taken many years for your account to reach the sum held in it, and you should consider how long it would take you to save the same amount of money. If you can afford to do so, it is a good idea to keep some or all of the money invested so that you can work towards future goals you may have, such as paying for university fees and accommodation or saving to buy your first home.
4. Transfer some of the funds into a lifetime ISA (LISA)
From when you turn 18 up until age 39 (or up until age 50 if you already have a LISA), you will have the option to transfer money saved in your ISA to a lifetime ISA (a ‘LISA’). These can be a tax-efficient way to get on the housing ladder; for full details on the specific LISA terms, please visit www.gov.uk/lifetime-isa.
The benefits of staying invested
Investing from an early age can make an enormous difference to the amount you will have in your investment portfolio when you’re older. It may mean that you need to invest far less money over your lifetime than you would if you started to invest at a later age.
Starting your investing journey might seem daunting, but it doesn’t have to be. We can speak to you about any questions you might have, and we also have a lot of information explaining investment terminology in the Understanding Finance section of the JM Finn website.
Next steps
Consider your goals for the future
It's crucial to think about what you would like to achieve with your money in the long term – and how the funds in your investment account may help you, particularly if they remain invested.
Discuss your options with a family member
While the person who set up the JISA on your behalf can no longer make decisions about your investments, it is a good idea to speak to them or another trusted family member about what you may want to do with your savings.
Speak to an adviser
For further information about setting up a JISA with JM Finn, please call 020 7600 1660.
The information in this article is for information purposes only and should not be considered a recommendation or solicitation to engage in investment activity. The eligibility of allowances, access to products and potential benefits are subject to change by HMRC. All figures quoted are accurate at the time of writing.
