It’s often said that while we may not be able to prepare the future for our children, we can at least prepare our children for the future. Which is why we find many parents and grandparents looking for ways to save for the big events in a child’s life. From school and university fees to a deposit on a property or a wedding.
Our advisers will help you put in place the right plans for their needs – giving them as much or as little control over the money saved as you would like.
We begin by asking questions about when the money might be needs, how much you want to save and how much control you want to retain. We also discuss whether it’s more tax efficient if parents or grandparents invest. We’ll also walk you through the main options available to help you make the right choice.
These are a great way to build up savings for any child under 18. Any funds held in an existing Child Trust Fund (CTF) can be transferred easily into a Junior ISA too. And whether you choose a cash JISA, a stocks and shares JISA or a blend, you can save as much as £9,000 a year.
With a Junior ISA, anyone can make contributions. Including grandparents, friends and other family members. You can also transfer funds between providers to get the best returns. While the child can take control of the account when they reach 16, they can’t withdraw the money until they turn 18.
These can be popular with parents and grandparents because the person setting up the account retains control until the child reaches 18. There’s no annual limit to contributions and money can be withdrawn at any time to pay for expenses like school fees.
Another advantage is that the trust is taxed as belonging to the child. This means it’s likely that any income earned is likely to be tax-free. There is one notable exception to this rule. If income exceeds £100 a year, this is treated as the parent’s earnings and taxed at your marginal rate. So it often makes sense for grandparents to save on the child’s behalf.
While Junior ISAs are common, relatively few parents or grandparents take out a ‘self-invested personal pension’ (SIPP). People are often unaware that they can set up a pension for a child. Even though they don’t pay tax, children will still benefit from 20% tax relief on pension contributions up to an annual limit.
This offers your family tax-efficient way to make long-term investments for your child. In any one tax year, you can pay in up to £2,880. The government will then add up to £720 in tax relief. So to the grand total could be as high as £3,600. And you’re free to add more to the pension above this threshold – it just won’t benefit from the added tax relief.
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As truly independent advisers, we don’t have in-house products we have to sell. And we don’t limit our advisers to specific financial solutions. Instead, we give them the freedom, knowledge and resources to recommend what’s best for each client so they can ensure the best possible outcomes.
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