The government has more than doubled the amount clients are allowed to invest in their children's Junior Isa in today's Budget.
In supporting documents to the Budget, published today (March 11), the government announced the subscription limit for Jisas and Child Trust Funds would be hiked from £4,368 to £9,000 per year for 2020-21.
The document stated: "By saving towards their future, families can give children a significant financial asset when they reach adulthood — helping them into further education, training, or work."
Jisas allow under-18-year-olds to save or invest tax-free. The child invested for cannot touch the money until they turn 18 but can save up to the limit a year tax free in either stocks and shares, savings or a mixture.
Adrian Lowcock, head of personal investing at Willis Owen, said: “This is a truly eye-catching change, doubling what can be saved in a Jisa or CTF, and allows parents to save truly life-changing amounts for their children tax free.
"It also acts as a way to encourage savings for the next generation, helping to ingrain a vital long-term savings habit in our children.”
Keith Richards, chief executive of the Personal Finance Society, said it was great to see the amount families could save into such vehicles would be more than doubled.
However, he argued the government needed to do more to encourage a long-term savings habit for consumers of all ages.
Laura Suter, personal finance analyst at AJ Bell, said the increase meant a parent starting next month for a newborn child could build a tax-free pot of more than £240,000 by the time their child reaches 18, (assuming they put the maximum in each year and it grows by 4 per cent every year after charges).
But she said: "It’s the biggest jump in the allowance since the Junior Isa launched in 2011, but with the average subscription per account being less than £1,000 it’s unlikely to be a boost many households will use.
"The move to hike the Junior Isa allowance but keep the main Isa and Lifetime Isa rates the same means it only benefits a smaller group of people – making the move cheaper for the government."
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