Save, make, understand money


Autumn Statement 2013: ISA limit boosted to £11,880

Carmen Reichman
Written By:
Carmen Reichman

The government will boost ISA, Junior ISA and child trust fund (CTF) annual subscription limits in line with the consumer price index.

The 2014-15 ISA limit will be increased to £11,880 per year – half of which can be saved in a cash ISA – while the Junior ISA and CTF limits will both be increased to £3,840, from £3,720.

However, Chancellor George Osborne stopped short of announcing whether the government was planning to introduce a cap on the amount savers can hold in tax-free ISA accounts, as recently speculated, with one suggestion having been to cap it at £100,000.

He also did not say whether he would allow children who hold CTFs to transfer their savings to new Junior ISAs.

He had announced in his fourth Budget in March, that the government would consult on CTFs and the possibility of letting children switch from CTFs to Junior ISAs.

The move would throw a lifeline to millions of children between the ages of two and 11, who are stuck in expensive funds or are being kept on low interest rates.

Hargreaves Lansdown head of financial planning Danny Cox warned running two separate schemes adds complexity and doesn’t encourage the savings culture the government is hoping to achieve.

He said: “Unfortunately the CTF is in terminal decline with many providers offering lower rates and worse choice than is available from Junior ISA and the government needs to recognise this. A change to the rules would allow more and better choice and be great news for over six million children with CTFs.”

Junior ISAs replaced CTFs in late 2011 but savers were denied the opportunity to switch their funds to the new product.

Junior ISAs offer better rates and more flexibility to savers than CTFs, while giving access to a much larger range of funds.

According to government figures total Junior ISA funds now stand at £557m after the first full year for which they have been available.

Under 18s can save up to £3,720 a year tax-free in the accounts. A total of £392m was subscribed to 295,000 Junior ISA accounts in 2012-13, with an average subscription of 1,327 per account.

Children holding CTFs, who were not allowed to open a Junior ISA or switch their funds to one, were facing increasingly difficult conditions in the last two years.

The interest on CTFs could be as little as half that on Junior ISAs, while switching funds within CTFs could also prove expensive with fees of around 6% on some funds.

CTFs were given to children born between 1 September 2002 and 2 January 2011, who were given an initial £250 cheque from the government to be invested in a selection of cash savings accounts or funds.