The government today announced draft regulations for the new Junior Isas, which will replace Child Trust Funds. The aim is to launch the new Isas at the start of November, but there will now be a period of consultation.
Until the child who owns a Junior Isa reaches the age of 16, his or her accounts will be managed by the person with parental responsibility for them. Eligible children over the age of 16 will be able to open Junior Isas for themselves.
No withdrawals from Junior Isas by account holders will be permitted until the child reaches 18. It will also not be possible to transfer CTFs into Junior Isas, or vice versa. The government will impose no limit on minimum contributions to Junior Isas, which will please the industry.
Your children will be able to hold up to one cash and one stocks and shares Junior Isa at a time. The limit for annual contributions is £3,000, which will operate across both accounts if they have both a cash and stocks and shares Isa.
Any cash put into Junior Isas will be ‘locked in’ until the child is 18, and the Isa will then, by default, become an adult one.
The Treasury has estimated that six million children will be eligible for Junior Isas at launch, with 800,000 more eligible each year after that.
Mixed response to Junior Isas
Paul Davies, savings analyst at Which?, commented: ‘It’s good news that there is a viable alternative to replace Child Trust Funds and the higher contribution limit is welcome. However, it’s a shame that the government will not contribute to the scheme by providing a voucher as it did with CTFs, and the encouragement for poorer families to save will now be lost.’
There was a differing view from Danny Cox, Head of Advice at Hargreaves Lansdown: ‘The Junior Isa has the potential to be the most successful children’s savings scheme of all time.’
Always a good time to check you have the best savings account
Whilst considering saving for your children, you also need to know that your own savings are working as hard as they can. Check out the very latest rates on savings accounts and cash Isas.
With the Isa deadline for the current tax year almost upon us (5 April 2011) some companies will still accept your application for an Isa as long as it is received before that date. Use our guide to find the best cash Isa for you.
If you want to top up savings for your children above the Junior Isa limit, you can always use standard children’s savings accounts, which you can compare and find our more about on our website.
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