Junior ISA plans announced

Posted on March 31st, 2011 | Categories - Savings

ISA accounts for children to be introduced this November.

Child Trust Funds have been scrapped but Junior ISAs will act as a high street alternative.

Junior ISA accounts for children will be launched on 1 November under new government proposals.

The tax-free accounts will be launched this autumn following the news, revealed last year, that the government was considering the creation of an investment scheme to replace Child Trust Funds (CTF).

The Junior ISAs will allow an annual contribution limit of £3000 where as CTFs used to allow a yearly limit of £1,200. It also means that children will be able to bypass the current limit on the amount of tax they can shield from the Inland Revenue.

However, the government will not make a cash contribution to the new ISAs as it did with CTFs.

The invested money will only be able to be accessed once the child reaches the age of 18 – at this point the account will become an adult ISA by default.

It is estimated that about six million children will be eligible for a Junior ISA once the scheme is launched. A further 800,000 will become eligible a year after. All high street banks and building societies that currently provide standard ISAs will add the junior accounts to their product list.

Although the launch date has been set for 1 November consultation on the draft regulations will continue until May.