Treasury to introduce 'junior ISAs'
Janaki Mahadevan
Wednesday, October 27, 2010
The Treasury has confirmed that it is to introduce tax-free savings accounts for children in an attempt to plug the gap left by the abolition of Child Trust Funds.
Financial Secretary to the Treasury, Mark Hoban, made the announcement today, describing the accounts as "junior ISAs" that will offer parents a tax-free way to save for their child’s future.
The government revealed it was investigating the possibility of tax-free accounts last year after criticism greeted the Treasury’s decision in May to stop all payments to Child Trust Funds from January 2011.
Hoban 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 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 government is finalising the structure of the accounts and intends for them to be available by autumn 2011.
According to the Treasury, features of the new account will be:
- All returns will be tax-free
- Funds placed in the account will be owned by the child and would be locked in until the child reaches adulthood
- Investments will be available in cash or stocks and shares
- Annual contributions will be capped
- There will be no government contributions into the account
