Use your child - best child savings account

lyndabear

please help i would like to set up savings accounts for two grandsons aged 5 and1.i would like to put in fifty pounds for each and set up dd for twenty pounds to each monthly.i would like to retain control of these until they are eighteen. what kind of account would be best and with which bank.we are in northern ireland

xylophone

See http://www.hmrc.gov.uk/tdsi/children.htm
You will be wanting to set up "re" (bare trust) accounts for the grandchildren (Lynda Bear re ....)
If your grandchildren are non-taxpayers (most likely unless they're child stars or models...) then an R85 should be signed by one of their parents so that the interest on the accounts can be paid tax free.

As you will see from the link, under current tax rules, the R85 can only remain in place up to the 5 April following the 16th birthday unless the account passes to the child at that age.

As you wish to retain control after that age, the R85 must be cancelled and the tax reclaimed on behalf of the child if he is still a non-tax payer - the link explains how this is to be done.

You can open any account that for which the provider will accept a "re" designation.

You could perhaps start with the "Little Rock" account which is available up to the age of 16 and then move the money into something fixed term for the last two years? http://www.northernrock.co.uk/savings/find/savings-accounts/Little_Rock_Access_Account_Issue_2/

Tillybird

Hi,

I have £7k to invest for my daughter until she is 16 (9 years) and want to know the best way to invest it for her to yield the best return. There are so many products out there it's hard to know which is right for us, should I look at simple savings accounts or something else? A lot of the higher interest earning accounts don't allow lump sum investments so it's difficult to know what to do. Would appreciate any advice anyone has.

Regards

Tillybird

xylophone

See http://www.hmrc.gov.uk/tdsi/children.htm
http://www.money.co.uk/savings-accounts.htm
http://www.hmrc.gov.uk/individuals/savings-income.htm
http://www.hmrc.gov.uk/rates/it.htm
The Little Rock account might suit http://www.northernrock.co.uk/savings/find/savings-accounts/Little_Rock_Access_Account_Issue_2/
You could invest in any account where the provider allows a "re" designation.
You might consider investing in an investment trust or OEIC but he capital is at risk - the risk to cash savings is inflation.

JenE_2

Hi all
My parents have asked that I research the best way and accounts for them to give our daughter (3 weeks old) a lump sum towards university costs in the future. I'm hesitant to put it in her name in case she wanders off the rails and wants to spend it all on drugs when she's 18. And it seems the savings accounts for kids aren't that great interest-wise anyway. Me and her dad are both higher-rate taxpayers, so the tax will have an impact if it's in one of our names. Are there any inherittance tax issues?
Any advice?
We will also open an account for her for birthday/Christmas money, so any advice on that would be welcome (we'll be looking for ethical/mutual accounts if poss)
Thank you!

xylophone

See and read carefully http://www.direct.gov.uk/en/moneytaxandbenefits/managingmoney/planningyourpersonalfinances/dg_10013916
http://www.hmrc.gov.uk/tdsi/children.htm
http://www.hmrc.gov.uk/rates/it.htm and http://www.hmrc.gov.uk/tdsi/ten-per-cent-guidance.htm - (allowance figures out of date see previous link).
http://www.hmrc.gov.uk/individuals/savings-income.htm

Your parents are making an absolute gift to their grandchild and the money is hers absolutely - this could have IHT implications for your parents. See
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

With regard to any money given by a child's parents to a minor or unmarried child, note the "£100 rule" - this does not apply to the JISA. I would always recommend that any money given by you (parents) outside tax exempt schemes is kept apart from money given by any body else. http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/SavingsAndInvestments/ISAsandJuniorISAs/DG_199672

As you will see from the above, the money given to your child can be held in a "bare trust" - however, the child has the legal right to capital and income at the age of 18. A bare trust can be used for cash or investments - see an example here http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/

It is possible to create a discretionary trust but the tax rules are complex - see http://www.hmrc.gov.uk/trusts/types/index.htm - if such a course is planned take legal advice.

Froggitt

IMHO, let your parents open the account for your child, absolute gift etc, in childs name etc (not through you as it may cause complications with the £100 rule), just dont give child the account details until you or they want to.

Agree with xylophone, keep accounts separate if poss. ie another account for birthday money from other people, another account for money from you and hubby.

xylophone

IMHO, let your parents open the account for your child, absolute gift etc, in childs name etc (not through you as it may cause complications with the £100 rule), just dont give child the account details until you or they want to.

See http://www.hmrc.gov.uk/tdsi/children.htm
The child has an absolute right to access to capital and interest in a bare trust at age 18 - not to advise him could lead to tax complications.

Froggitt

Yup I agree the capital and interest belongs to the child, but theres nothing that says you have to tell the child that he/she has ten grand sitting in an account somewhere.

xylophone

Yup I agree the capital and interest belongs to the child, but theres nothing that says you have to tell the child that he/she has ten grand sitting in an account somewhere.

Income will arise on the account - there could be tax implications.
There could also be complications if the young adult were receiving means tested benefits as he is absolutely entitled to capital and income at the age of 18.