The government has now announced that the contribution limit for the new 'Junior Individual Savings Account' will be £3,000 per annum.


The Junior ISA will be available from November 1st 2011 and each child will be able to hold one cash and one stocks and shares account within the annual allowance.

These new ISAs replace the last government's policy of the Child Trust Fund (CTF). Unlike the CTF the government will not be contributing towards Junior ISAs other than providing a tax efficient haven for their money.

The parents of those children born between September 1st 2002 and January 2nd 2011 will have received a voucher for between £50 and £250, depending on when they were born, to seed a CTF account in the child's name. The money in the account is locked away until the child attains the age of 18 (currently) and money can be added to the account up to a limit of £1,200.

Those with CTFs will be barred from opening a Junior ISA, but the CTF annual contribution limit will be lifted to match that of the Junior ISA when they become available so as not to disadvantage CTF holders.

Just as with the CTF, the money held in a Junior ISA account will be locked away until the child is 18 (currently).

Assuming that the limits are lifted in line with a nominal 2% inflation annually and also achieve a growth of 5%, the amount accrued over the 18 years could well exceed £100,000. That is assuming that successive governments do not meddle with or tax raid them at a later date.

Many families cannot save £3,000 a year in total so this will probably only prove advantageous to the wealthy. Also, if parents are not using their own ISA annual contribution limits then maybe the Junior ISA is not the first place they should be putting the money as, however good your intentions, over an 18 year period family emergencies always crop up and having an unobtainable stash of money locked away could be heart and/or family breaking.

Some people will also be wary of giving their 18 year old access to a sizeable lump sum. Not all 18 year-olds are equally mature.

There is also the question of who gets the money should the child sadly pass away before they are 18 years old and the parents say are divorced and remarried? Or where other family members or even family friends have contributed more than the parents?

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