NatWest has launched a new junior stocks and shares Isa for parents and guardians who want to save and invest for their children, for as little as £10 a month.
Like other junior Isas, you’ll be able to save up to a certain amount tax-free each year (£9,000 in 2021-22) up to the child’s 18th birthday.
You have the option of opening one directly through NatWest Invest, or the Royal Bank of Scotland (which is part of the NatWest Group) under the Royal Bank Invest Junior Isa.
Here, Which? looks at what the junior investment Isa offers, and compares its fees and features. We also look at whether you should consider opening a junior investment Isa for your child.
What does NatWest’s Junior investment Isa offer?
The NatWest Junior investment Isa is a stocks and shares account, meaning the money you put in will be invested.
Like other investments, there is some risk so you may see your investments fall in value. However, any investment growth will be tax-free as it’s all held within an Isa ‘wrapper’.
Parents and guardians can invest an initial lump sum from £50, or set up a regular monthly contribution of £10 a month.
There are no setup fees or exit charges on part or full withdrawals, and customers can transfer existing junior Isas or Child Trust Fund products into the new junior investment Isa at no charge.
- Find out more: junior Isas rules and allowances
How do you invest?
You have the option to pick from five ready-made portfolios. Each one has a different level of risk from ‘low’ to ‘high’, and choosing in this way might suit you if you are new to investing and feel you can’t, or don’t want to, make your own investment decisions.
NatWest says you can keep track of your investments with an online investment account.
You can learn about how stocks and shares Isas work here. If you’re fairly new to the world of investing, be sure to check out our guides on the basics of investing, what asset classes are, and how to build an investment portfolio.
- Find out more: what is investment risk?
How much does it cost?
Like other Junior stocks and shares Isas, there are fees to consider.
NatWest imposes a platform fee of 0.15% per year and a 0.5% ongoing fund charge on the value of your investments.
Platform fees cover the cost of administration and online access to your account, while the ongoing charge covers the cost of managing your investment.
You’ll also be charged for buying and selling shares and other investments that make up the fund, which NatWest says will be 0.07% at most.
- Find out more: investment platform fees
How does NatWest compare with other providers?
NatWest is among an array of junior investment Isa providers. These can either be via banks, or dedicated investment platform providers.
To compare NatWest’s offering to others, you must look at a few key things: costs, features, and services.
NatWest is a relatively low-cost provider for a junior stocks and shares Isa, but it’s not the cheapest.
Vanguard, a Which? recommended provider, also charges an account charge of 0.15% a year, but its fund-management charges are just 0.22% of the value of your investments.
However, to invest with Vanguard’s junior Isa you’ll have to deposit £100 a month, or start with a £500 lump sum.
Some providers use a fixed-fee model, such as Interactive Investor, at a maximum of £119.88.
Generally, fixed-fee providers suit those with large investment portfolios (say, £50,000 or more) as percentage-based fees can rack up when you have a lot of money in your investment account.
Features and services
While fees are important, if your provider doesn’t offer the things you want and need from them for your child’s investments, then it probably isn’t worth going for the cheapest option.
You should also consider investment opportunities. With Vanguard, your choice of investments is more limited as you can only invest in 75 of its own funds, meaning there are no share trading options. NatWest’s investment Isas include shares. But consider that more limited investment choice won’t necessarily hinder the performance of your investments. The key thing to remember is to diversify your portfolio to spread your risk.
Some provider’s websites have more information than others, such as AJ Bell and Hargreaves Lansdown, which offer investment news, calculators and newsletters. NatWest primarily operates as a bank, so its investment content is quite thin in comparison.
We’ve asked thousands of users of major investment platforms to rate their services across a range of aspects, from customer service and online functionality to the clarity of charges and value for money.
If you want to open an account or switch, we’ve got you covered. Check out our guide to the best and worst investment platforms for 2021.
Do parents usually save and invest for their kids?
Appetite for saving for children is definitely growing. According to new HMRC data, around one million junior Isa accounts were subscribed to in 2019-20, the ninth full financial year since the scheme was launched, up from 954,000 in 2018-19.
These were made up of just over 700,000 Junior cash Isas, and over 300,000 junior stocks and shares Isas.
Despite the junior Isa allowance being raised to £9,000 in 2019-20, up from £4, 368 in 2018-19, the amount being saved doesn’t seem to have jumped accordingly. In 2019-20, £971m was deposited, £3m less than in 2018-19. This is mainly down to a fall in the amount being saved into junior stocks and shares Isas, which fell by £45m in a year.
- Find out more: Isa savings trends
Should I open a junior investment Isa for my child?
Opening a junior stocks and share Isa is worth it if you can afford the fees and are willing to take on the investment risk.
If you can afford to, it’s well worth speaking to a financial adviser who can help you make a decision on your investments.
Your money should be invested for at least five years to ride out any stock market bumps, allowing your investments enough time to grow. Therefore, if your child is over 13 years old, a stocks and shares Isa may not be suitable.
To open a junior stocks and shares Isa, you must be the child’s parent or guardian with the proceeds being invested on behalf of the child.
Bear in mind you can’t open a junior investment Isa if your child already has a Child Trust Fund, although you should be able to switch to one.
- Find out more: how to transfer a stocks and shares Isa