By starting early and using the full Junior Isa (Jisa) allowance each year, parents could build a substantial savings pot of more than £136,000 for their children.

Jisas, which replace child trust funds (CTFs), will launch on 1 November. They are available to children born on or after 3 January 2011, children under 18 born before September 2002 and children who don’t already have a CTF. More than six million children are eligible for Jisas.

Like adult Isas, they are tax-efficient (the only tax payable is 10 per cent dividend tax on shares) and come in two types: a cash Jisa and a stocks and shares version. The maximum contribution is £3,600 a year.

Alliance Trust Savings (ATS) says that if the full amount is invested for 18 years, assuming the allowance rises by 2 per cent each year (in line with inflation) and the investment in the Jisa grows by 7 per cent each year, parents can amass a huge pot of £136,000 for their children, which could pay university costs or provide a deposit on a first house.

A large number of companies have confirmed that they will offer stocks and shares Jisas. Among them are F&C, Fidelity Worldwide Investment, Fundsmith, Witan Investment Services, Legal & General Investments, ATS, AJ Bell, Family Investments, Chelsea Financial Services, TQ Invest, The Children’s Mutual and Hargreaves Lansdown.

Meanwhile, The Children’s Isa will offer investments from TCF Investment, Prudential, Ecclesiastical and Scottish Widows Investment Partnership.

ATS has a special offer for parents opening a Jisa before the end of this year: it will waive the annual administration fee (normally £25 plus VAT) until 1 August 2012. ATS’s Jisa will offer access to 1,400 funds, 4,000 UK equities and more than 21,000 international equities.

Witan also has a special deal. Parents will receive a £25 John Lewis voucher if they open a Jump Jisa before the end of the year and deposit a lump sum of £250 or £50 per month or quarter.

However, few cash Jisa products have been confirmed. Nationwide and Bank of Cyprus are planning to launch cash Jisas on 1 November, but Bath Building Society has postponed the launch of its product until April 2012. The Building Societies Association was unable to name any members launching cash Jisas in November.

The big banks are still mulling over what products to offer. Halifax and Lloyds TSB say they will offer Jisas but are unsure whether these will be cash Jisas or the stocks and shares type, or when they will launch.

RBS and NatWest have postponed their stocks and shares Jisa launch until 28 November. RBS may look into launching a cash Jisa at a later date. HSBC says it is interested in running a scheme but couldn’t give any more details.

As Jisas are long-term products, a stocks and shares one should perform better than a cash one, especially with interest rates at 0.5 per cent. Martin Bamford, financial planner at Informed Choice, comments: ‘Equities are most likely to deliver the highest return over [long] timescales, although it will be important to gradually move into less volatile assets as your child gets older.’

He adds: ‘We are yet to see the full range of Jisa providers, but we are hoping that these will include some fund supermarkets where investors will have access to the widest possible range of investment funds. CTFs were always a bit of a let down because of their limited and often expensive fund choice.’

Jisas in a nutshell

• Cash Jisas and stocks and shares versions are available; children can hold both
• £3,600 annual allowance
• Children can manage a Jisa when they are 16 and access it when they are 18
• Children with CTFs aren’t eligible for a Jisa
• Anyone, such as friends and grandparents, can contribute to a Jisa
• Unlike CTFs, there is no government contribution