Parents will be able to start putting aside £3,000 a year tax-free to build up nest eggs for their children, the Government has confirmed.
When the Junior ISA launches on November 1 about six million children will be eligible for the savings product, which aims to provide parents with a simple, tax-free way of putting money aside for their offspring after the end of the Child Trust Funds (CTF).
The Government will not contribute anything to the ISAs, like they did to CTFs.
There will be an annual contribution level of £3,000 for the accounts, which will be offered by high-street banks and building societies.
The Treasury estimates six million children will be eligible for the ISAs at launch, with a further 800,000 becoming eligible each following year. Funds will be locked in until the child is 18 years old and then the accounts will become adult ISAs by default.
CTFs were scrapped for children born from this year within days of the coalition Government taking office in a bid to save £500 million a year.
Existing CTF holders will not be allowed to apply for a Junior ISA, but the CTF investment limits will be increased to £3,000 a year from the current £1,200 to make sure holders do not miss out.
Junior ISAs have potential to offer a tax-free £95,730 coming-of-age present at age 18.
