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The Treasury has announced a new tax-free savings opportunity for children.
A new account known as the junior ISA is intended to offer parents a simple way to save for their offsprings' future. The Government is perparing to work closely with stakeholders to finalise the structure, and ministers intend for the new account to be available by autumn 2011.
Key features include:
- All returns will tax-free.
- Funds will be owned by the child and locked in until adulthood.
- Investments available in cash or stocks and shares.
- Annual contributions capped.
- No government contributions into the account.
Mark Hoban, financial secretary to the Treasury, said, ‘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’.
The Association of Investment Companies (AIC) welcomed the announcement of the junior ISA, saying it was 'supportive of any initiative that encourages parents and grandparents to invest for the future financial security of children'.
AIC director general Ian Sayers said it was 'important that the transition from child trust funds to the new regime is as straightforward as possible. To help this, the Government should ensure its new approach... is simple, with one single product on offer.
'Given that costly administrative systems were established for child trust funds these should be used as the basic operating model for the junior ISA, stripping out those elements that are no longer needed,' added Mr Sayers.
