The Government has raised the maximum amount that parents can invest in the new junior ISA savings account.
The accounts, which will come into effect as from 1 November, will allow families to set aside money for their children as an alternative to the child trust funds (CTFs), which have been dropped.
Junior ISAs, like their adult counterparts, are tax-free.
Originally, the Treasury has set an annual allowance limit of £3,000, which can be invested in stocks and shares or in a cash deposit.
However, that ceiling has now been raised to £3,600 per annum.
The new annual limit will stay in place until 5 April 2013, when it will be adjusted so that it stays in line with the consumer prices index.
It will be possible to transfer funds from one type of Junior ISA to another.
Commenting on the increased investment limit, the Treasury said: “It was argued that a higher limit could make Junior ISA accounts more attractive to providers, and help to ensure that any minimum contribution rules they operate would be consistent with the government’s objective that accounts will be accessible to people at a range of income levels.”
There has been criticism that children holding CTFs do not qualify for the new Junior ISAs.
Kevin Mountford of Moneysuperpmarket.com commented: “With the lack of focus on CTFs, the danger is children with these accounts will languish on poor deals, while those with Junior Isas will benefit from competition in the market.”
