Junior ISAs launched on 1 November 2011.
The new savings initiative for children has been introduced following the closure of the Child Trust Fund schemes in January this year.
Junior ISAs will be available to all children living in the UK who do not have a Child Trust Fund account. There will be a total annual limit of £3,600 for all payments into these accounts, which can be a cash account, stocks and shares account, or combination of the two.
Once the child reaches 18, the Junior ISA will become an ISA. As with Child Trust Funds, no withdrawals can be made until the child reaches 18, although the child can be made responsible for the account at the age of 16.
Any money the account makes will be tax free, but unlike Child Trust Funds the Government will not be making a contribution.
Junior ISA accounts will be offered by a range of banks, building societies, credit unions and stock brokers.
According to the Tax Incentivised Savings Association (TISA), Junior ISAs are likely to be equal in popularity to the Child Trust Fund. The latest survey of Child Trust Fund’s by TISA found that 19.6 million is being paid into 4 million accounts each month.
Commenting, Tony Vinelott from TISA said: “There is a strong desire by parents to ensure that their children have a financial asset at 18. Both schemes allow family and friends to contribute towards this.
“It is often overlooked that schemes such as these also have the potential to improve the financial literacy of youngsters – it clearly demonstrates the benefits of regular saving over the longer term and that has got to be a good message to get across.”
