Parents can save £260k nest egg for their children to pocket at 18

In his first Budget, Chancellor Rishi Sunak doubled the Jisa allowance. Jonathan Jones looks at the effect it will have

Parents saving for their children’s futures will be able to save twice as much into Junior Isas (Jisas) and child trust funds after the Chancellor dramatically raised the limits in the Budget.

Jisas are tax-free saving accounts for children that can be accessed when they turn 18. From April 6, parents will be able to put £9,000 a year into the savings account, more than double the current limit of £4,368. The same limit will also apply to child trust funds.

If the full allowance is used every year and markets rise by an annual 5pc, the long-term historical average, parents could give £260,000 to their children on their 18th birthday. Under the old limit, this would have been £126,073.

In the Budget document, the Government said: “By saving towards their future, families can give children a significant financial asset when they reach adulthood – helping them into further education, training, or work.”

This is the largest jump in the allowance since Jisas launched in 2011.

Cathy and Ben Baxter, from Horsham, said they would welcome any extra help in saving for their two children, Eryn and Lewis.

“It’s the people in the middle that are getting squeezed by taxes and there’s just not enough support for families,” Mrs Baxter said.

In the 2017-18 tax year, the latest available data, parents saved an average of £994 per account, according to HM Revenue & Customs. A record 907,000 new Jisas were subscribed to, up from 794,000 the year before and more than three times the number of accounts logged in the first full year of the Jisa in 2012 (296,000). There were 3.7 million active accounts in total.

More than two-thirds of new Jisas in 2017-18 were cash – 636,000, compared with 271,000 stocks and shares accounts.

Sarah Coles of Hargreaves Lansdown, Britain’s biggest fund shop, said: “If your child is older, and wants to spend the money in their Jisa within the next five years, then cash is often the most sensible option.” The best deal on the market, being offered by

Cathy and Ben Baxter with Eryn and Lewis

Coventry Building Society, pays 3.6pc. The account can only be opened in branch or via the post. The best online deal is from National Savings & Investments (NS&I), which pays 3.25pc.

Parents putting money away for their younger children to access several years in the future would be better off choosing a stocks and shares Jisa, as high-risk investments have the ability to return much more.

Historic averages show that markets typically make 5pc per year on average, beating the cash Isa.

“Unfortunately the data shows us that it’s clearly not just older children whose Jisas are in cash,” Ms Coles said.

Stock market trackers, which simply mirror an index or basket of companies, are recommended for novices.

Those with more experience could choose riskier assets such as specialist funds buying smaller companies or investing in emerging markets.