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Children can't go to work, but their money can

7th October 2011 Print

Alliance Trust Savings has shown that parents could set their children on the way to a debt-free university career and also cover the cost of other significant lifestyle events, by contributing the maximum amount to a Junior ISA every year until the child turns 18.

Junior ISAs will be available from 1 November and will provide families a new, simple and tax-efficient way to save for their child's future following the axing of child trust funds (CTFs) in January 2011. For most parents, saving regularly is an integral part of securing their child's financial future and Junior ISAs can provide financial stability through a long term investment plan which is sheltered from the tax man.

The government has announced that the Junior ISA savings limit will be £3,600 per annum and parents who maximise these contributions will significantly boost their children's chances of being able to afford to attend university at a time when tuition fees are hitting all-time highs. The £3,600 limit will apply until 5 April 2013 and will then be updated annually in line with the consumer prices index (CPI), as is the case with other ISA products.

By starting early and maximising the Junior ISA subscription allowance each year, parents could build a substantial savings pot, which is free of capital gains tax, of over £136,000 by investing with Alliance Trust Savings, whose 100% fund commission rebate structure could add up to £8,500 to the value of a Junior ISA over an 18 year period.

Junior ISAs are a tax efficient way to save for a child's future which over time can lead to a substantial nest egg that can help to pay for a child through university or even pay towards a major life event such as a wedding.

Garry Mcluckie, Head of Product & Marketing at Alliance Trust Savings commented: "The news agenda has been awash with stories about the rising cost of tertiary education with many universities setting tuition fees as high as £9,000 per year. With the average cost of a wedding in the UK reaching £18,000, and getting on the housing ladder becoming increasingly difficult for first time buyers, supporting the next generation is a real concern for parents but investing monthly or annually into a Junior ISA on behalf of their children could be the answer.

"We would encourage all parents to carefully consider the benefits of saving regularly through a Junior ISA when they become available, as they offer a straightforward way to save for children in a tax efficient manner. We welcome the government's efforts to encourage long-term savings from an early age and the ISA brand is a strong one that should help to boost the number of parents looking into the new products.

"Our 100% commission rebate adds to investment growth, and can increase the value of a Junior ISA pot significantly by the time a child reaches 18. We have always rebated any commission we receive straight back to the customer. Our commission rebates effectively reduce the amount of investment charges you pay, which allows your savings pot to grow quicker. Add to this the tax benefits associated with a Junior ISA and you have a compelling proposition."