by Natasha Terbraak
T
he Government has confirmed the launch of the tax-free children's savings replacement for the Child Trust Fund, named the Junior ISA, for autumn this year.
The new accounts were given the go-ahead in last week's Budget, though finer details of the Individual Savings Account (ISA) are yet to be confirmed.
Currently, it is known that the savings products will be available for under-18s who do not already have a Child Trust Fund - an estimated 6 million children - and that the Junior ISAs will be available for cash as well as stocks and shares. The annual investment limit has not yet been announced, but it is thought it may be as high as £3,000.
In addition, although the Junior ISA will resemble the scrapped Child Trust Fund in many ways, it was confirmed last year that the Junior ISA would not have any government contributions. Under the Child Trust Fund scheme, all children would receive a £250 voucher at birth and a further £250 at age seven.
Eligibility for the new accounts will also be backdated, meaning children who were born before the start of Child Trust Fund eligibility - 1 September 2002 - can now open a Junior ISA.
The axing of the Child Trust Fund, which excluded all babies born from 1 January 2011 from opening the account, was one of the most high-profile and controversial of the coalition government's harsh deficit-cutting measures.
There was also criticism that the gap between the end of the Child Trust Fund and launch of the Junior ISA later this year would leave many parents in a savings quandary.
Many of the largest Child Trust Fund providers have confirmed they will be offering the new Junior ISA after it has been launched. Although the fact that the Junior ISA is voluntary will mean less popularity than the Child Trust Fund, hard-hitting government reforms such as the near trebling of tuition fees may prove a strong incentive for parents to build up a nest egg for their child's future.
Parents can continue to contribute into existing Child Trust Fund accounts until they reach maturity, and other savings products such as Child Tax-Exempt Savings Plans and Children's Stakeholder Pensions are attracting an increasing amount of interest as other tax-efficient savings alternatives.
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Compare Children's Stakeholder Pensions
Draft rules on the Junior ISA scheme will be published this week.
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