Plan to overhaul children's tax-free savings

Proposed rule changes to Junior Individual Savings Accounts announced in last week's Budget have been described as a potential "lifeline" to the savings industry by financial experts.

Until now, parents wanting to save for their children tax free have been forced to keep child trust funds and JISAs (which were introduced in late 2011) separate. In fact, parents with an existing CTF were barred from using the new JISA, leading to a lack of enthusiasm for the latter. But last week the Chancellor launched a three-month consultation on lifting such restrictions and on allowing the transfer of cash between the two.

"If this goes ahead it will re-invigorate the JISA market," said Andrew Hagger, the head of finance at Moneycomms.co.uk. "At present, it is dominated by a few building societies and the Halifax. But with the potential to tap into the millions held in CTF accounts, we can expect some of the big banks to enter the market which will boost competition and returns for savers."

CTFs were introduced for children born after 1 September 2002. Government gave parents a lump sum to be invested which could be topped up. On assuming power in 2010, the coalition axed CTFs as they were seen as too expensive.