The government will today confirm a maximum annual allowance of £3,000 for the new Junior ISAs.
The allowance for the ISAs, designed to partially fill the gap left by the axed Child Trust Funds (CTFs), can be invested in stocks and shares or a cash deposit, although any investments are locked until the child is 18.
Available from 1 November, they will be sold by high street banks, building societies, investment companies and friendly societies already selling Isas and the government expects 800,000 children a year to benefit from them, the Guardian reports.
Six million children who missed out on CTFs because they were born before the scheme was launched or after it was axed could benefit from the new products.
However, CTF holders will not be allowed to apply for a Junior ISA, although the CTF investment limits will be increased to £3,000 a year from the current £1,200.
What the experts said:
Danny Cox, head of advice at Hargreaves Lansdown: "Junior ISAs have the potential to be the most successful children's savings scheme of all time. Save £3,000 in a Junior ISA every year from birth until age 18 and their coming of age present could be £95,730 tax-free assuming a 6% return after tax and charges."
Tom Stevenson, investment director at Fidelity International: "Young people often have the greatest opportunity to benefit from the long-term performance of stock markets and the Junior ISA will allow them to do so in a tax-efficient way, while also learning about the benefits of saving. The Junior ISA is not a replacement for creating a sensible joined-up system of adult saving - that is to say one where people can move their money more freely from short-term ISA savings to longer-term pension pots - but, along with steps like the abolishment of compulsory annuitisation of pensions, it is an important move in the right direction."
Patrick Connolly, AWD Chase de Vere: "While a CTF may have no contributions other than from the Government, with a Junior ISA parents or grandparents are making more of a commitment to save regularly by investing their own money. If the investment industry does embrace Junior ISAs and provides a wide range of good quality fund options then, with the tax advantages and simplicity as well, the Junior ISA should become the default option for children's savings."
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