Why are the government taking away their contributions to my children future?
The new Junior ISA will be released in the Autumn of this year as a replacement for the Child Trust Fund.
Many of you will be asking what the difference is, and what the need to change the product was? The main difference is of course the lack of government contributions, which have been falling over the last few months any way.
When Labour introduced the Child Trust fund in 2003, they gave every new child born in the UK, regardless of parent’s wealth a £250 voucher to invest in a child trust fund of their choice.
This voucher dropped to £50 late last year and has now been abolished, although people with children born in 2010 should still receive one.
One of the main reasons the government has cut this perk is because of the financial troubles the government has got itself in.
It is estimated that the scrapping of the contribution will save the treasury £500 million a year, a substantial figure given the current economic problems.
Of course, the new Junior ISA will still give you better savings opportunities than most standard savings accounts. Tax free long term savings tend to pay a better interest rate than other accounts, and the stocks and shares funds will benefit if the stock market grows on the back of the crisis.
Whilst the maximum Junior ISA investment figures have yet to be announced, speculation suggests it may be higher than the current £1200 a year of the CTF, and this can only be a good thing for people looking to save for their children’s futures.