Investment for child that will be inaccessible beyond 18

13Kent

My parents want to withdraw the savings they have put aside in my children's savings accounts that they have set up for them as they are not achieving any interest. They would like to invest in some sort of a plan that would mature after they are 18, as they will be getting a lump sum in their child trust funds at 18, and would therefore like them to get a lump sum a few years later maybe when they have finished university (if they get there!) . They would like to be able to add amounts on birthdays, or maybe set it up with the initial lump sum (about £500) and then add to it with a small monthly payment. Can anyone suggest anything suitable please.

xylophone

A bare trust, which is the normal arrangement, becomes available to the "beneficiary" at the age of 18 as of right.

You say that your parents wish to withdraw the savings they have put aside in the children's accounts "as they are not achieving any interest" - why are they not achieving any interest? This seems very odd!

I am assuming that the accounts are held in bare trust at the moment?

There are types of trust that can be used to keep money out of the hands of beneficiaries until after the age of 18 but they are rather more complex.
http://www.hmrc.gov.uk/trusts/types/discretionary-accum.htm
http://www.lawskills.co.uk/glossary/a/aged_18__25_trust.html

See http://www.hmrc.gov.uk/tdsi/children.htm

Your parents should be able to find an account (for each child) that pays reasonable interest. This does not have to be an account specially for children - many accounts can be held in trust.
http://www.money.co.uk/savings-accounts.htm?t=391369&u=78ab3c1f3f1

Perhaps the money could be moved into a five year bond just before the child turned 16?

13Kent

Thanks for your reply, they are getting some interest but only a minimal amount.

oldvicar

Maybe a simple solution would be to plan to put the child(ren)'s savings into a fixed term deposit account such as a 5 year 'bond' from a bank or building society in the few months just before each of them reaches 18, and make sure you choose one that does not permit withdrawals or closure before maturity.