Junior ISA limit expected to be £3000

31 March 2011

Details of the Junior ISA are set to be laid out today with the annual limit expected to be £3,000.

The ISAs will become available from 1 November. The allowance can be invested in stocks and shares or deposited in cash but the child will not be able to access the money invested until they reach 18.

Experts are predicting that if a parent invests the full allowance of £3,000 each year they could accumulate savings of £107,923.08 (based on 5% growth per year and assuming the allowance rises each year by an inflation rate of 2%).

Junior ISAs were introduced as a replacement for Child Trust Funds, which are no longer available.

Those Child Trust Funds currently being used will see their limit rise from £1,200 to £3,000 to prevent parents from losing out.

But Junior ISAs will not receive any government contribution, unlike Child Trust Funds.

Tom Stevenson, investment director at Fidelity International, says: "Young people often have the greatest opportunity to benefit from the long-term performance of stockmarkets 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."


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