It will be announced next week that the new Junior Individual Savings Accounts (JISA) will be able to hold up to £3,600 a year tax-free, instead of the £3,000 described with the closure of Child Trust Funds (CTFs). This is an increase of 20% and is expected to reach about 6 million children who missed out on the CTFs.
Similar to adult ISAs, the money can be invested based on the stock market, or can be put into bank or building society deposits, allowing the nation’s youngest savers to learn fiscal responsibility at an early age.
This is good news for parents whose children lost out on the opportunity for help from the Government but is only available to those who were not able to open a CTF. Children born after September 2002 but before January 2011 would not be allowed the JISA according to the plans, which were announced earlier in the year. Instead, those children received at least £250 in vouchers for their CTF.
Upon criticism that banks and building societies are not offering competitive interest rates on CTFs, Mark Hoban, Financial Secretary to the Treasury, would like the schemes to be linked in some way, according to sources from the Treasury.
Each year, typically about 800,000 children are born. These children and those who are excluded from CTFs due to their birthdays will be eligible for a new tax shelter, expected to be the Junior ISAs. Earlier in 2011, Mr. Hoban commented on the positives of the JISA, saying, “Junior Isas are a great example of a simple, clear and jargon-free financial product that allows families to save and invest for their child’s future.
“They allow parents and family friends to contribute to children’s savings and will strengthen the savings culture.”
The £3,600 limit on JISAs will extend to those CTFs in existence, still a 20% increase. Mr. Hoban is believed to be discussing this matter and, following the exchange, will hopefully introduce the annual limit on both JISAs and CTFs this November. The merger of the JISA and the CTF will then be negotiated and work will be done towards combining them at a later point.