Advice for saving for a childs future

Nickij

Well I have just opened a CTF account but I am not planning on paying too much into this account, just a small monthly amount (around £10-20) and adding any gifts they receive from relatives for birthdays and christmas etc

This is because I don't want him to have access to everything we have saved for him when he is 18. I want to decided when to give him money we have saved for him - either towards a deposit on a house, education, a car etc

Does this mean I need to open an account in my name? If I open a savings account in this name will he have access to it at 18 like the CTF? Obviously I would prefer to have an account in his name as the interest would not be taxed?

Reaper

It's hard to see how the government justify it but if even if you open an account in your child's name the interest on it would become taxable as soon as it exceeded £100 of interest in a year (and that's on the whole amount, not just the bit over £100). Only CTF accounts are immune.

If you open it in your own name however your tax applies including possible inheritance tax when you hand over the money unless you live for at least another 7 years after that. Mind you there are lots of rules to do with inheritance tax such as the estate size and exempt gifts so I can't say for sure it would affect you.

Another option is to set up a discretionary trust for the child which gives you a lot of control over the money, but you would be needing a solicitor to help set that up so it would cost you. You would also have to read up on it to see if it is what you are looking for.

Nickij

Thanks for your help. I didn't realise that even a childs interest get taxed if its over £100 a year. I thought that PA counted towards interest earned too.

If that is the case I will just save up a separate account for him in my name. I will have to have a look what would be the best account for this:)

Reaper

Have you considered investments as well as savings? Over a long period of time investments (eg investment funds) ought to beat savings. Although dividends suffer income tax the growth part (assuming it goes up in value) gets taxed under Capital Gains instead and very few people use up their annual free capital gains allowance. It's around £10,000 at the moment.

Mikeyorks

Nickij wrote: »

If that is the case I will just save up a separate account for him in my name.

Sensible plan. Better to lose the 20% tax on the interest .... than risk the 100% loss on capital if he decides to go on a spree when he goes to University. I speak from bitter experience.

Put the money in an ISA if you / OH doesn't use yours .... as that resolves the tax issue. But go for the Savings account otherwise.

The £100 only applies to interest generated from funds from the parents (it's to stop you masking your funds under his PA) - not from other relatives. But putting it in your name is a sound consideration.

ses6jwg

I have done the same.

Cash CTF has been opened, we put any money from Birthdays into that.

Considering linking it to FTSE all share if FTSE 100 it drops back below 5000.

I did have a Natwest Child saver but the rate was abysmal.

So closed that and opened a 2 year halifax reserve account at 4.15% which is held "in trust" by myself.

Then I also have a Halifax childrens regular saver at 6%.

thats me sorted for another year.

might buy her some premium bonds for xmas.

Gymgenius

I've recently moved my children's CTFs to a provider which I'm very happy with. They won't be added to at all now.

I have also opened designated childrens investment plans into which I will pay a monthly amount.