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Grandparents want in on JISAs

Grandparents want in on JISAs

Category: ISAs

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

This week marks the fifth anniversary of the Junior ISA, or JISA. At current, only parents are able to open such an account for their child, but new research shows that one in three grandparents would have a bigger incentive to save for their grandchild if they were able to open a JISA for their grandkids themselves.

A survey by M&G and Opinium shows that two out of three grandparents would start to invest or invest more for their grandchildren with the right incentives, the ability to open a JISA being a big barrier at present. As it is, only 8% of grandparents contribute to the JISA accounts set up by their children for the grandkids.

Overall, annual contributions to a JISA in the 2015-2016 tax year stood at £1,248 – just over £50 per month – according to statistics from HMRC, with figures showing 740,000 account subscribed to. Since the five years it has been available, only one in three JISAs have been invested in stocks and shares. This is despite the fact that a stocks and shares JISA would have generated a pot of £8,343 in the five years since the start, compared with £6,703 from a cash account. Just remember that this higher gain also comes with a higher amount of risk, so it is not advised to open a stocks and shares JISA without doing some research into them first.

Going back to grandparents, calculations show that if they had been able to put away £50 per month for their grandchild from their birth until the age of 18, they would now have a savings pot worth £20,284 before tax, enough to help their grandchild cover two years of university fees.

Alexandra Ranson from M&G commented: "It's great that two million JISAs have been opened already, but just think how many more children might benefit if their grandparents could open an account for them, too."

What next?

If you're a new parent, consider opening a JISA and giving your own parents the details so they can also pay into it. Just remember that there is an annual tax-free limit to how much can be invested in these accounts, and that money can only be retrieved once your child becomes 18. Have a look at our Best Buys to find the top JISAs currently on the market.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.