The government has announced the introduction of a new childrens’ savings account.
Parents eager to compare savings on the best options for storing cash away for their children might be interested in a new alternative dubbed a Junior ISA being launched by the government.
This savings accounts package is intended to offer people with children a simple and tax-free way to conserve money for their youngsters’ future and is intended to act as an alternative to the child trust fund, which will be abolished as of January 2011 as the coalition seeks to reduce the country’s deficit.
An announcement by Mark Hoban, financial secretary to the Treasury, revealed that the Junior ISA should be available by next autumn, as consultations with a range of stakeholders have shown there is a “clear appetite” for families to be able to save tax-free for their children.
He added that – unlike the child trust fund – there will be no government contributions to these accounts and the amount that can be stored in them without taxation will be limited.
However, the new savings account package might not be suitable for lower income savers, an expert has said.
The government’s new so-called junior ISA savings account package will leave families on a lower income at a disadvantage, an expert has said.
According to a spokesman for the Child Poverty Action Group, the Conservative-Liberal Democrat alliance’s tax-free scheme – which is being introduced to help cushion the blow of the abolition of child trust funds – is good for those who are able to afford it, but could prove to be exclusive for higher-earning families.
He added that this may lead to “low levels of social mobility”, as unlike the child trust fund, there is no provision for the government to help out such parties with financial contributions into this new account, meaning that alternative such as fixed rate bonds may be better.
This follows on from Michelle Slade of Moneyfacts commenting that the junior ISA is likely to only appeal to “those parents who are willing to save for their children’s future”, which may not be overly common in the aftermath of the recession.
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