Come 1 November 2011 parents will have a new children's savings option in the form of the junior individual savings account (Isa). The junior Isa will replace the child trust fund (CTF), another government-sponsored savings scheme, which closed for new applicants on 2 January this year. However, existing CTFs will continue to be run until their maturity - that is, when the child in whose name they were opened turns age 18.
If your child was born on or after 3 January 2011 or before 1 September 2002 and is under the age of 18, they would not have qualified for a CTF but you can now open a junior Isa for them. Also, if you have a child born between 1 September 2002 and 2 January 2011 and they did not qualify for a CTF, for example because the family was living abroad, you can take out a junior Isa if your child is now resident in the UK.
The junior Isa has a number of tax benefits: interest and income earned on investments held within the Isa do not incur income tax, and if an investment is sold within the junior Isa it will not incur capital gains tax (CGT). However, the investment limit on the junior Isa is much lower than on the adult Isa – no more than £3,600 a year can be paid into the wrapper, in contrast to the £10,680 total limit for adults for the 2011-12 tax year, which increases to £11,280 in the next tax year.