The amount of cash that can be paid into the new junior individual savings accounts (ISAs) each year has been raised from £3,000 to £3,600, the Government has announced.
The new junior ISA scheme will protect children's savings from tax, but account holders will not be able to access their funds until adulthood.
The raising of the limit was welcomed by consumer groups and financial industry bodies. "The annual subscription limit is three times greater than the current limit on the child trust fund (CTFs), so family members and friends will be able contribute more tax-exempt savings than they are able to currently," said Brian Morris, the Building Societies Association's head of savings policy.
Junior ISAs will be launched in November and replace CTFs, which, unlike the junior ISAs, benefited from government top-up payments.
Children who have a CTF will not be allowed to hold a junior ISA, a decision described as "disappointing" by Kevin Mountford, head of banking at moneysupermarket.com. He added that he was worried that CTF holders would also suffer because of poor rates currently being paid by many providers.Reuse content