Earlier this year the government announced that child trust funds were to be abolished. Now they have announced their replacement. A new ‘Junior Isa’ range of savings accounts is to be launched next year. These accounts will work much like standard individual savings accounts (Isas) in that the returns will be free from income and capital-gains tax and it will be possible to invest in either cash or shares with them.
Anyone will be able to contribute to them on behalf of the child (although the government will not). However, any money put into them will be owned by the child and will be theirs to use as they like when they become adults. “I am committed to ensuring that all parents can save for their children’s future in a simple and straightforward account,” says Mark Hoban, the financial secretary to the Treasury. “The introduction of this new account means that we can still offer people a clear way of saving for their children, while saving the half billion pounds a year that we currently spend on child trust funds.”
In another welfare shake-up state pensions are also going to be simplified. They are currently made up of a hotchpotch combination of several different handouts: basic state pension, earnings related ‘top-up’ payments, and additional means-tested benefits. But Vince Cable now says the government is working on a universal payment of some sort. Details of the new scheme are still scant, but it is rumoured that there is to be one single payment of £140 a week – the basic pension is currently £97 a week.
Steve Webb, the pensions minister, has also announced that from 2012 millions of employees will automatically be enrolled in their company pension scheme. The idea (known as ‘NEST’) was first proposed by Labour, but has now been adopted by the coalition. From 2012, unless employees specifically opt out, they will take part in their company pension scheme (which all firms with more than 50 employees will be obliged to provide) and contributions will be taken from their salaries. It is hoped that the scheme will lead to seven million more people starting a private pension.