The government is to create a new tax-free savings account for children, replacing Child Trust Funds, which formally end in December 2010. ‘Junior ISAs’ will be available from Autumn 2011, open to all children born from January 2011 onwards.
The new accounts will have no government contributions.
New Junior Isas for children
The new accounts are designed to replace Child Trust Funds. They will be tax-free, with an annual contributions cap that has yet to be announced.
Like Child Trust Funds, Junior Isas will permit investment in stocks and shares as well as cash. Funds deposited can only be withdrawn when the account holder reaches 18.
Confirming that the new accounts would be available from Autumn 2011, Treasury Minister Mark Hoban said: ‘I am committed to ensuring that all parents can save for their children’s future in a simple and straightforward account. The introduction of this new account means that we can still offer people a clear way of saving for their children, while saving the half billion pounds a year that we currently spend on Child Trust Funds’.
Child Trust Funds end
As previously announced, all remaining payments into Child Trust Funds from government will end in December 2010. It will not be possible to open a new Child Trust Fund after this date, although existing accounts will remain open, earning tax-free interest until their holders are 18.
Children born from January 2011 onwards will be eligible for a new Junior Isa, although the new accounts will not open until the autumn.
The government has already reduced its contribution to new CTFs to £50 (from £250), or £100 (from £500) for low income families. Top-up payments at 7 ceased in August.
Other children’s saving accounts
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