Junior Isas will replace the Child Trust Funds, which have been phased out but, unlike the CTFs, Junior Isas will have no Government contribution. The savings plans, which will be offered by high street banks and building societies, will be ‘locked in’ until the child is 18 and will then become adult Isas by default.
If the total amount is invested each year, a child will have a pot of £54,000 plus any interest, by the time he or she is 18 and, like any adult Isa, the money can be invested in funds or used to buy stocks and shares.
The Treasury believes that currently six million children will be eligible for the Junior Isas with 800,000 more becoming eligible on an annual basis.
One criticism of the scheme is that the children of poorer families or those in care wouldn’t benefit as, unlike better off children there would be no family or friends to contribute to the pot. However, the Government has announced that provision will be made for children in care and that up to £5m will be spent on the scheme for them annually.
Children’s charities have been campaigning to ensure that children in care don’t miss out on the tax-free Isas, which could make a big difference to their lives once they reach 18. Barnardo’s Chief Executive, Anne Marie Carrie, said “This modest investment into savings accounts for looked after children will help these young people achieve their goals and avoid negative outcomes such as homelessness or falling into cycles of debt."
For more information, please visit www.glazers.co.uk
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