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New Junior ISA is launched

An estimated six million children are now eligible for a new Junior ISA following the launch of the tax-free savings account on 1 November.

The accounts have similar terms and conditions to an adult ISA, with investments available in cash or stocks and shares, up to an annual contribution limit of £3,600.

Accounts are owned by the child and funds are locked in until the child turns 18, although children will have the right to manage their accounts from age 16.

Junior ISAs are seen as a replacement for Child Trust Funds (CTFs) and are only available to children under the age of 18 who do not have a CTF.

While the government hopes the accounts will encourage more people to start saving, some experts say that many providers have yet to publish their rates.

‘Labour failed to make Child Trust Funds popular or to persuade the public that they should be a permanent fixture in Britain, even in times of austerity,’ said Nick Pearce, from the Institute for Public Policy Research.

‘It will be interesting to see what the big providers have to offer over the next few days as more products are launched.’

Unlike the CTF, there will be no Government contributions into Junior ISAs, prompting concerns amongst some campaigners.

‘Only time will tell whether the new Junior ISAs are going to work, but because the government will not provide an initial voucher to kick-start the account, many low-to-middle earner families may not feel they can afford to open one,’ warned Anna Sofat, director of Addidi Wealth.

‘The bad news is that there will be about six million children with CTFs who face being left in 'zombie' funds, trapped by providers who no longer feel they need to offer a competitive deal’.