Parents saving for their child’s future will be able to more than double the amount they put into Junior Isas (Jisas) after Chancellor Rishi Sunak took the current annual limit from £4,368 to £9,000 in his Budget on 11 March.
Jisas are tax-free saving accounts for children that parents and grandparents can add to over the years. They started life as Child Trust Funds (CTFs) in 2002 and the Government paid £250 into them on the birth of a child and then parents or guardians could top them up and the savings could be invested in cash deposits or stocks and shares. CTFs were then replaced by Jisas in 2011.
Young savers who hold these Isas can access them when they turn 16, and at 18 they can withdraw the money, with the accounts becoming full cash or stocks and shares, or Adult, Isas, which have a higher allowance of £20,000. This amount was not changed in the Budget.
The announcement could be of particular importance for holders of CTF as, since they were scrapped, many parents may well have forgotten that they even opened up an account and now have the opportunity of providing a sizeable savings pot for their child.
As the Budget support document stated, by saving towards their future, families can give children a significant financial asset when they reach adulthood, helping them into further education, training, or work.
The substantial amount it will be possible to save from 6 April this year, which could be more than £240,000, assuming the maximum allowance is saved every year and growth of 4 per cent, should also help to ingrain long-term savings habits in children and young people.