The Coalition government has announced plans to replace the Child Trust Funds with Junior ISA's. CTF's proved an abysmal failure as usually only the state would make contributions into a limited range of funds available, all of which have lost money after inflation and therefore acted purely as a vehicle for financial institutions to earn commissions and therefore a proved a waste of over £6 billion of tax payers money.

However the new Junior ISA offers the possibility for especially higher rate tax paying parents to extend their annual tax free savings by at least £1,200 per year per child (possibly as high as £5,100) without being forced to buy funds that only benefit the financial institutions.

The key condition is that deposited funds could not be withdrawn until the child reached at least 16 years of age and probably 18 years.

As the interest earned is tax free, this should therefore not fall fowl of current rules that limit interest earned per parent per child to £100 per annum.

Once the child reaches 18 years of age, they will be sitting on a tax free savings pot that they could either utilise towards University education costs or continue to hold as a source of tax free income.

Availability of the new Junior ISA accounts is at least 9 months away and unlike CTF's will not receive any state contributions, thereby saving the tax payer £500 million a year on the current annual cost of CTF's contributions.

Further details will follow as to who will be eligible, as it will probably exclude existing CTF accounts holders, though probably there will be a mechanism for transferring a CTF to a Junior ISA, just as a decade ago TESSA's and PEPS were able to converted into ISA's.

Comments and Source : http://www.marketoracle.co.uk/Article23831.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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Comments

Pred
29 Oct 10, 12:01

Nadeem Walayat - Euro

Nadeem,

Your forecaset on the Sterling is very good. Could you do a forecast on the Euro.

Thanks

Pred

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