Junior ISAs with a limit likely to be £3000 a year will be eligible to all children under 18 who do not have a Child Trust Fund from this Autumn.
HMRC predict that six million children will be eligible for Junior ISAs when they are launched, with 800,000 children newly eligible each year. Draft regulations published with the Finance Bill will be consulted on over the next few months with a launch expected in November.
Junior ISAs are seen as a replacement for the Child Trust Fund which was scrapped last year by the coalition government. Junior ISAs will not include money from the government towards savings, as was the case with Child Trust Funds, but have a higher tax free limit for savings.
The government said the aim of the new ISA for children was to ‘provide families with a simple, transparent, accessible and competitive product to save for children who do not have a CTF [Child Trust Fund]’.
Child savings plan provider Family Investments’ chief executive John Reeve said the new ISA would ‘increase the likelihood of every child having a financial asset when they turn eighteen.'
“While the new product is an ISA in name, it has more in common with its predecessor the CTF. The Junior ISA allows parents, grandparents and anyone interest in a child’s future to make deposits over an eighteen year period which cannot be withdrawn” he added.
While Family Investments welcome the higher tax-efficient allowance of £3,000 it said the most important feature of the product would be ‘its universal availability and simplicity.’
The existing allowance for CTF savings is expected to be aligned with the Junior ISA limit to ensure CTF account holders do not lose out.
Investment manager Fidelity International said it welcome the progress on Junior ISAs and said the Junior ISA would help teach younger generations about the importance of saving.
Fidelity estimates that if the Junior ISA allowance increases with inflation and the full annual limit is invested each year, savings growing at five per cent a year could reach over £100,000 in a 18 year period.
Both cash and stocks and shares Junior ISAs are expected to be available.
© Fair Investment Company Ltd