The replacement to the Child Trust Fund – announced at the end of last year, will be launched on 1 November 2011.
According to the government, the tax-free Junior ISA will allow parents to make contributions of up to £3,000 per year into these savings accounts – substantially higher than the recently scrapped Child Trust Fund which allowed just £1,200 of deposits per year.
In last year’s May Budget we leaned that Labour’s Child Trust Fund was to be axed, which soon became a highly controversial and high profile spending cut enforced by the coalition government.Under the previous scheme, all children born after September 2002 were eligible for the tax-free savings accounts scheme, which provided a £250 voucher to all newborns, to beinvested in a Child Trust Fund account and locked away until the child turned 18.
After the government announced that the scheme was to be axed from the start of 2011, voucher contributions were cut to just £50 per child, while previous plans to provide an additional payment when the child hit seven removed completely.
As expected, babies born from 1 January 2011 are no longer eligible for the vouchers, however parents can contribute up to £1,200 a year adding to a tax-free pot.
The Junior ISA will be available to all children aged under 18, including those that were born before the Child Trust Fund, however any children that already have a Child Trust Fund account cannot open a Junior ISA.