A Junior Stocks and Shares ISA (JISA) is a tax-efficient way to build a nest egg for a child. And because they cannot touch it till they turn 18, this allows plenty of time to let compounding work its magic, assuming the account is opened at a young enough age.
Here’s how investing £150 per month for a newborn could lead to quite a surprisingly large sum just under two decades later.
JISAs are fantastic
First though, I think it’s worth pointing out some of the benefits of a JISA. Because while only a parent or legal guardian can open the account for a child under 16, relatives or even friends can also pay money into the account once it’s open.
For the 2026/27 tax year, they can collectively contribute up to £9,000 per year. And just like a standard Stocks and Shares ISA, there’s no tax on returns or dividends.
As mentioned, the real benefit here is that the money is locked away. The child cannot touch the cash until they turn 18. At this point, the account automatically converts into an adult ISA and the child gets full control.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Long-term investing
Let’s assume somebody starts with a £1,000 lump sum in the account, then invests a further £150 each month thereafter. This would equate to £1,800 per year.
By 2045, just over 18 years away, the JISA would grow to around £85,475 (ignoring trading fees). This assumes a 9% annual return, which I think is achievable given the total annualised return of the FTSE 100 has been about 9.4% over the past decade.
Of course, there’s no guarantee that return will continue in future. But with many high-quality UK shares generating significantly more than 9.4% per year, I see this level of return as realistic.
Beautifully boring
What sort of stocks should a JISA custodian think about buying? Well, given we’re investing for our loved one, I wouldn’t take any unnecessary risks with penny stocks.
Instead, I would want to focus on established, dividend-paying companies with solid track records. One that strikes me as a great example is 3i Infrastructure (LSE:3IN).
This is a FTSE 250 company that invests in private businesses that provide essential infrastructure services. Basically, the sort of things that would make a 10-year-old yawn, but help the firm with its aim to deliver a total return of 8% to 10% per year over time.
3i Infrastructure has a strong track record of selling assets at a significant premium once they have matured. Earlier this month, it agreed to sell its 71% stake in airport equipment firm TCR for €1.14bn (approximately a 50% uplift from almost a year ago).
With the proceeds, it plans to repay drawings from its revolving credit facility and invest in new assets. However, its £212m investment in German fibre operator DNS:NET is likely to be written down to zero. So the risk is that it doesn’t always get things right.
However, I see this failure as a rare outlier, as the rest of the portfolio is performing strongly. The forecast dividend yield is 4%, and 3i Infrastructure has raised its dividend every single year for nearly two decades.
Overall, I think this is a high-quality compounder worthy of consideration.
