The Junior ISA, an individual savings account designed for children’s savings, is set to be launched this November. Providers throughout the UK, such as Shepherds Friendly, have announced their intentions to provide the new children’s savings product.
Most have added the product to their websites, allowing online visitors to register before the official release of the savings account.
Child Trust Fund
Previously, the government-backed children’s savings scheme was called the Child Trust Fund, but all babies born from January 2011 will be now be eligible for enrolment in the new savings plan.
Much like the now-scrapped Child Trust Fund, the Junior ISA is set to offer tax-free savings, but it will not feature any Government contributions.
Any child who was not eligible for a Child Trust Fund will be allowed to open a Junior ISA, and friends, relatives, and parents alike will be able to contribute up to £3,600 per year without any tax penalty.
The Child Trust Fund is also set to increase its limit from £1,200 to £3,600 so as not to give Junior ISA babies an unfair tax advantage.
Multiple product types
Additionally, the Junior ISA is set to be offered in two types of accounts: a Cash Junior ISA and a Stocks and Shares Junior ISA. This shows the similarity between the children’s savings account and adult ISAs.
This gives parents a significant incentive to put away money tax-free for their child. The money will continue to accrue interest until the child’s 18th birthday, when they will have access to the lump sum that can give them a head start in an education, first properties, or first cars.
It also means tomorrow’s leaders will have a lump sum for any potential investments that they would pursue.
Many families will look to the Junior ISA as a good way to save money for the recently-increased tuition fees attached to higher education. For some children, the Junior ISA could mean a debt-free start to their life after graduation.