Financial Secretary to the Treasury, Mark Hoban, today announced that the Government will create a new tax free children’s savings account. The new account, described as a ‘Junior ISA’, will offer parents a simple and tax free way to save for their child’s future.
The Government will now work closely with stakeholders to finalise the structure of the accounts, and intends for the new accounts to be available by autumn 2011.
The Government is committed to encouraging saving for children, within the constraints of the public finances. Following an informal consultation with a range of stakeholders, it is clear that there is an appetite for families to have a clear, simple and tax-free savings option for their children, following the end of Child Trust Fund eligibility from January 2011.
The new account will have the following key features:
• 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
Mark 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 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".
Notes for Editors
1. On 24 May 2010 the Government announced that it would reduce and then stop Government contributions to the Child Trust Fund (CTF). This was part of a package of measures designed to make exchequer savings of £6.2 billion in 2010-11, to help tackle the UK’s unprecedented budget deficit. This will save £320million this year and over £500 million in each future year.
2. In July 2010, the Government made regulations to reduce payments at birth for children born from August 2010 to £50 (reduced from £250); or £100 (reduced from £500) if they are from a lower income family. The regulations also stopped all Government payments at age 7 from August 2010.
3. The Savings Accounts and Health in Pregnancy Bill, introduced on 15 September 2010, will stop all remaining Government payments and end new eligibility for children born from January 2011.
4. Eligibility for the new account will be backdated, to ensure that no child born after the end of CTF eligibility will miss out on the chance to have one of the accounts.
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