The savings limit for Junior Isas, which will launch on 1 November 2011, look set to receive a 20% boost.
When the government announced the introduction of Junior Isas, to replace child trust funds (CTFs), the savings allowance was set at £3,000 a year. However, it is expected that Mark Hoban, financial secretary to the Treasury, will announce a £600 increase to push the annual savings limit to £3,600.
The increase in Junior Isa allowance will treble the maximum contributions that could have been made into CTF limits, which was £1,200 a year.
What are Junior Isas?
Junior Isas will act similarly to cash Isas. They are saving and investment ‘wrappers’ which shield any growth of your cash from both income and capital gains tax.
These new children’s savings vehicles will be available through high street banks, building societies and other providers. You’ll be able to save the full, proposed £3,600 in cash or in investments like shares, unit trusts and investment trusts.
Getting access to Junior Isas
Any money placed into a Junior Isa will not be able to be accessed until the child turns 18 years old. After this point, the Junior Isa will become a full Isa and the adult limits, currently £5,340 for a cash Isa and £10,680 for a stocks and shares Isa, will apply.
However, draft legislation for Junior Isas will not allow transfers from CTFs into Junior Isas. We’ve written to the Treasury to ask them to amend this. We’re concerned that children may be missing out on the best deals available if they’re stuck in the soon to be defunct CTFs.
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