A tax free savings account is to be introduced by the government to replace Child Trust Funds (CTFs).
Set to be available in autumn 2011, the junior ISA will follow the rules of traditional ISAs, in that
annual contributions will be capped. Unlike the CTFs, the new ISAs will not have government contributions. The government has said that it will work closely with stakeholders to 'formulate the structure of the accounts.'
Funds will be put into the junior ISA which will remain unreachable until the child reaches 18. The government is already saving money by reducing the Child Trust Fund (CTFs) payments – before May of this year, parents received a minimum £250 voucher for newborns, which they had access to from the age of 18. A further payment was made at the age of seven.
But in May, the Government announced it would reduce and then stop CTFs as part of spending cut plans. These payments were reduced in August and entirely from January 2011. This will save the Government £320 million this year and £500 million in future years.
Treasury financial secretary Mark Hoban says, “I am committed to ensuring that all parents can save for their children’s future in a simple and straightforward account.
"The introduction of this new account means that we can still offer people a clear way of saving for their children, while saving the half billion pounds a year that we currently spend on Child Trust Funds," he added.
