Parents saving for their children's futures will be able to save twice as much into junior Isas (Jisas) and child trust funds after the Government boosted the limits in the Budget today.
Jisas are tax-free saving accounts for children but can only be accessed when they turn 18. From April 6, parents will be able to save £9,000 a year into the savings account, more than double the current limit of £4,368. The same limit will also apply to the older child trust funds.
In the Budget document, the Government said: "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."
Adrian Lowcock of fund shop Willis Owen, said the policy was "eye catching" given there had been no announcement or demand for the current limit to be increased.
"Parents can now 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," he said.This is the largest jump in the allowance since Jisas launched in 2011.
For those that invest the full amount every year, they may have more than £85,000 with one provider, which would not be covered by the Financial Services Compensation Scheme so choosing multiple may be worthwhile in the future.
Laura Suter, of fund shop AJ Bell, said: "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 Jisa allowance but keep the main Isa and Lifetime Isa limit at £20,000 means it only benefits a small group of people."
In the 2017-18 tax year – the latest available data – there were 907,000 Jisas that received new money, according to HM Revenue & Customs with parents saving an average of £994.
Parents can choose a cash Jisa or a stocks and shares Jisa. Almost two-thirds chose the cash option, with generous savings rates currently on offer of more than 3pc.
However, stocks and shares Jisas are recommended for parents with younger children. Although stocks are more risky in the short term, over longer periods they have historically made the most money for savers.