By Rowena Purrett
With the Child Trust Fund being eliminated and parents waiting several months between the January scrapping of the programme and the beginning of the new Junior ISA in November, another savings option has become the best way to save while remaining tax exempt.
Not a New Plan
These plans have always been in existence along with the previous schemes, and allowed a way of saving tax-free alongside the Child Trust Fund, which has now been cut for babies born from January first of this year.
The child tax exempt savings plans have been highlighted as filling the gap between the Child Trust Funds and the new Junior ISAs, which will not be sold until November. Some are concerned about the Junior ISA, as it has no government contributions, meaning the child tax-exempt savings plan could remain an important player in tax-free saving.
These tax-exempt savings plans allow contributions of smaller amounts, usually around £15 to £25 as a total of a lump sum which will then be released at the end of the contract with no tax, as long as the investment period is at least ten years.
Low risk
This low risk type of plan, which is very straightforward as well, is extremely attractive to grandparents and parents who would like to put aside a small amount each month for the future of their children. This has a tax allowance of £25 per month can only be offered by friendly societies.
This amount is in addition to the £10,680 ISA limit and have different repercussions depending on the plan. According to an analyst at FinanceNews.co.uk, “The emergence of new tax exempt savings products is good news at a time when families may be struggling to see how they can afford to put away much of their income towards savings, and is an especially great opportunity for those parents with children who were not eligible for a Child Trust Fund.”
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