Where should I put my sons inheritance money?

Vettyvoo

My 2 year old son has inherited £10,000 from his Grandfather and the family have requested that it goes into a savings account that he won't be able to touch until he is 18. I know it's not life changing money but I want to save it in the best place possible so that it will help him in the future. He has £50 in a child trust fund with Santander but reading the web pages about child savings accounts I don't think putting the money in there would be the best choice. I'm very confused with all the different options available, so any advice you could give would be gratefully received!

Mickyk

I don't know a huge amount

But I would look at fixed rate long term bonds.

A 1 year plan where you can re-invest each year @ 5% (Also Green or something)

http://www.regive.org.uk/savings-bond/5afsb.html

Means by the time your son turns 18 it should be over £20k (minus applicable taxes)

**This is assuming the bond stays at the same value, and you re-invest the full amount each year

***I could be wrong

Ifts

Mickyk wrote: »

But I would look at fixed rate long term bonds.

A 1 year plan where you can re-invest each year @ 5% (Also Green or something)

http://www.regive.org.uk/savings-bond/5afsb.html

Means by the time your son turns 18 it should be over £20k (minus applicable taxes)

Be aware that there is no FSCS protection with this outfit, you may end up losing any money deposited with them if something should go wrong. :eek:

Warning signs about this outfit discussed in this MSE thread:

MSE News: Warning! Re-Give savings not protected:

A new savings account provider offering high interest is NOT protected by any compensation scheme, which means if it went bust savers would be likely to lose their cash.

https://forums.moneysavingexpert.com/discussion/4074601

kingdavid2012

Well,you've come to the right place.I thing the website has many experts of finances management.Why don't you contect them?
The usual practice is that you assess the risk and the expectation.Then you make your decision.
Good luck.

xylophone

You could invest the money in the CTF (up to £3600 per annum http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ChildBenefitandChildTrustFund/ChildTrustFund/WhentheChildTrustFundisupandrunning/DG_193644)
but otherwise you will hold the £10,000 in "bare trust" for your child - see http://www.hmrc.gov.uk/tdsi/children.htm. Note the information about the R85 and what happens when the child turns 16.

See also http://www.hmrc.gov.uk/tdsi/ten-per-cent-guidance.htm should it become relevant, remembering to check for current tax allowance rates at the appropriate time.

You are not confined to accounts specially for children - you can open any account that allows investment by Trustees. http://www.money.co.uk/savings-accounts.htm?t=395401&u=f18b6503709 might be something here.

In view of the long time scale, you might wish to investigate holding an Investment Trust or OEIC for your child in bare trust - see example here http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/ of Investment Trust bare trust - see also http://www.trustnet.com/Education/SaveChild.aspx?ms=6
"Establishing a bare trust is very simple. You will need to complete a ‘declaration of trust’ form, which the investment manager you choose to invest with can provide to you. You should consider who will be the trustee – possibly one of the parents – and whether you wish to appoint a second trustee in case the first dies before the trust becomes available to the child."
http://www.hmrc.gov.uk/individuals/savings-income.htm

jimjames

Over the long term like that I would look at investment trusts as mentioned above or unit trusts in a Junior ISA (although you would need to add money over 3 years due to the annual limit)

http://www.invtrusts.co.uk/aam.nsf/investmenttrusts/investchildren

We use these for our childrens savings. It will go up & down as it is a share based investment but over 18 years it should perform better than cash on deposit.

I wouldn't touch the 5% mentioned above with a bargepole based on the history of that company and the total lack of protection.

xylophone

Junior ISA

The child already has a CTF (see post 1)so is not eligible for a JISA.

oldvicar

I would be tempted to consider some of the 'inflation proofed' or index-linked accounts that appear from time to time.

When (if) NS&I next have index-linked savings certificates on sale, I'd rush to get them. 100% 'safe', simple, and available for you to hold as a trustee. They also generally let you keep them (roll-over) after the first maturity period, so ought to be able to continue until age 18 or more. The main 'downside' is that they are tax free, so suit higher rate taxpayers expecially well, rather than giving extra advantage to e.g. a child who doesn't use all their personal income tax allowance - but they still don't 'lose out'.

In the meantime I'd look at other offerings. Unfortunately MSE's current top pick, Santander's Index Linked Savings Bond (issue 14) doesn't appear at first glance to be available to trustees.

In recent times Birmingham Midshires, Bank of Ireland (Post Office) and some building societies have offered such accounts, and will I suspect do so again if you are patient.