A new tax-free children's savings account is set to be launched to encourage parents to set aside money for their offspring, the Government announced today.
Final details on the accounts, which will be available from the autumn of next year, have yet to be decided.
But the Government says it will not contribute anything to the accounts, while there will be an annual cap on the amount parents can pay in.
No access until adulthood
Any money saved will be owned by the child and they will not have access to it until they are 18. Parents will be able to hold the money in cash or invest it in stocks and shares.
Child Trust Funds were scrapped for children born from next year within days of the coalition Government taking office in a bid to save £500 million a year.
The move prompted an angry response from the financial services industry and consumer groups who said the accounts had been highly successful in encouraging people to save for their children.
Existing Child Trust Fund providers urged the Government to keep the infrastructure for the accounts in place, even if it did not contribute to them, so that parents who wanted to save for their children had an obvious product in which to do so.
Financial Secretary to the Treasury Mark Hoban says: "I am committed to ensuring that all parents can save for their children's future in a simple and straightforward account.
"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."
Child Trust Funds were introduced by the previous government for children born on or after September 1 2002.
Children received a £250 voucher from the government at birth, with those from less well-off families getting £500, while parents, friends and relatives were able to save up to £1,200 a year into the funds.
Around 3.7 million Child Trust Funds had been opened by parents by the end of March this year, according to HM Revenue & Customs.
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