According to the Fair Investment Company, the government should introduce children's Individual Savings Accounts (or ISAs) to replace the Child Trust Fund, which will be abolished after 1 January 2011.
The group argues that there is a sort supply of children's savings accounts and that ISAs could be the future of tax-efficent saving. The firm says there are only a few options currently available from friendly societies, which allow a maximum investment of £25 per month.
It was suggested that an ISA limit of £3,600 for children would encourage families to build up a nest egg tax-efficiently.
Others emphasise the other savings options available, including Children's Tax-Exempt Savings Plans and Unit Trusts for Children. Natasha Terbraak of MyEggNest.com said, "Tax-Exempt Savings Plans are a great alternative to CTFs that offer the same tax-free savings, only without the government vouchers. They can be used to save for children of all ages, and are a great way to build up a lump sum for your child through small, regular payments."
CTFs were introduced by the Labour government and will be scrapped next year as part of the coalition government's £6.2bn worth of spending cuts. Currently, new babies receive a £250 voucher from the government and a further £250 at the age of seven. Up to £1,200 can be saved by family and friends per year tax-free.
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