Once the new Junior ISA is launched this coming fall, as many as six million children in the UK will have the ability to enjoy tax breaks on their savings accounts similar to what mum and dad currently have.
The new Junior ISA will allow those under the age of 18 to save up to £3,000 every year. The funds can be used for many different things such as a house deposit or even college fees in the future.
The JISA will effectively be a miniature version of the adult ISA currently available from personal and business bank account providers in the UK. It is designed to replace Child Trust Funds in light of the current Government’s dismantling of the older scheme.
From September 2002 CTFs provided tax free accounts to those children born after that date. Additionally each CTF came with a kick-off payment of £250 at the minimum, provided free from th Government.
For those children born August 2, 2010 and later, this bonus was trimmed down to £50. However for children born after January 2 of the current year the account was not available at all.
CTFs had been criticised due to the exclusion of any children born prior to September 2002. However the JISA provides for those children born prior to the CTF start date.
Those who already have a CTF will be able to continue using it until they reach the age of18. In order to make the remaining CTFs competitive with JISAs, the government raised their annual contribution limit to £3,000, up from £1,200.
One financial advising planner stated that for a short period of time, both JISAs and CTFs will be running alongside one another independently.