Budget 2020 documents reveal the Junior ISA (JISA) and Child Trust Fund annual subscription limit will increase from £4,368 to 9,000 for the 2020/21 tax year starting 6 April.

The notes state that by saving towards their future, families can give children a significant financial asset when they reach adulthood – helping them into further education, training, or work.

Latest official data from HM Revenue & Customs for the 2017/18 tax year revealed that the average JISA subscription was £994 which makes lifting the ceiling by so much look “surprising but welcome”, says Jason Hollands, managing director of wealth manager, Tilney.

He said: “If you’re a parent or grandparent fortunate enough to be able to make use of this for a new born, that means up to £162,000 contributions can be squirreled away tax-free over 18-years commencing in the new tax year (assuming the allowance remains static). If you assume a maximum monthly contribution of £750 a month and an average annual compound return of 6% (after costs), then the child could end up presiding over a financial war chest of £290,515 after 18–years to see their way through college debt-free, or get on the housing ladder.”

At 5% growth, the pot could be worth £260,000.

However, HMRC statistics revealed that 70% of JISAs were deposited in cash accounts rather than investments, dashing the chances of giving a child a windfall upon their 18^th birthday.

This is a pattern noted since their inception, Hollands said.

He added: “While everyone should have some rainy day money, cash is a dreadful long-term home for wealth – and Junior ISAs are supposed to be a long-term scheme with the assets only becoming accessible when a child is 18 – because of the corrosive effect on inflation.”

With the Bank of England having slashed interest rates today to an all-time low of 0.25%, returns on savings will be minimal. Despite the volatility of stock markets amid the coronavirus crisis, “they have repeatedly thrashed cash over the longer-term, so those planning to utilise newly turbo-charged Junior ISAs should get investing”, Hollands said.

The Junior ISA has been available since November 2011 when the starting allowance stood at £3,600. You can’t hold both a JISA and Child Trust Fund.

The adult ISA allowance will remain at £20,000 for the 2020/21 tax year.