Grandparents savings for grandchildren

anandp

My parents want to put money in an account of sorts for their grandchildren.

They want the money in the children's names - what is the best way to do this?

The children are under 5.

Rafter

Have a look at the 'Junior ISA' tab at the top of the page under Banking Saving as a good start point.

R

xylophone

'Junior ISA'

Depending on the age of the children they might not be eligible for the JISA - they might have CTFs - the grandparents could contribute.
https://www.gov.uk/child-trust-funds/overview

Otherwise they could be "bare trustees" on a savings account for each child - see http://www.hmrc.gov.uk/tdsi/children.htm re R85.

Grandparents could consider an investment trust held in bare trust for each child - example here http://www.fandc.com/new/IT/Default.aspx?id=78401

anandp

ISA's aren't an option here. My parents want to be able to control the account and then handover at 18, or have it automatically pass control over to the child at 18.

xylophone

My parents want to be able to control the account and then handover at 18, or have it automatically pass control over to the child at 18.

See links above (post 3) re bare trusts.

https://www.gov.uk/trusts-taxes/types-of-trust
It is important that it is clear that the account is held in bare trust - this means that the child owns capital and income absolutely and has the right to assume control at his majority - any interest is tax free while the child is a non - taxpayer. (And see link re 10% guidance if appropriate, remembering allowance figures are out of date).

Accounts held in bare trust are outside the grandparents' estates.

anandp

As a follow-on, any idea what the best bare trusts around at the moment are?

xylophone

"Bare Trust" is just a way of holding an account - see previous links.
http://www.wfw.co.uk/companyData/3623/resources/BN06.pdf

http://www.moneywise.co.uk/investing/investment-trusts/consider-investment-trusts-your-childs-finances
http://www.find.co.uk/investments/funds-and-trusts/guide-to-oeics

http://www.bestinvest.co.uk/investment-research/investment-companies/it-vs-ut.aspx
Presumably you are looking for thoughts on investments you might consider e.g. http://www.henderson.com/sites/trusts/city-of-london-trust/home.aspx
http://www.invescoperpetual.co.uk/portal/site/ip/products/productDetail?contentId=f519e6233e0ed210VgnVCM1000002e1ebf0aRCRD

http://www.fandc.com/new/IT/Default.aspx?id=78401

If funds paying interest are chosen, tax can be reclaimed if children are non-taxpayers http://www.hmrc.gov.uk/individuals/savings-income.htm

anandp

I understand what bare trusts are now and you are right I'm wondering about other people's experiences with what investments they've gone for. Is there anything similar to a bare trust that just holds cash more like a savings account?

jimjames

anandp wrote: »

I understand what bare trusts are now and you are right I'm wondering about other people's experiences with what investments they've gone for. Is there anything similar to a bare trust that just holds cash more like a savings account?

If the children are under 5 why would you want to hold cash in them as it is guaranteed to be worth less by the time they are 18 than it is now.

A mix of investments as above should give a good hedge against inflation and beat cash over the term you've mentioned.

Edit - just read your sig which makes it even more puzzling why you want cash!

Interested in property investment, web tech, social media, forex, equities.

xylophone

As I said, a "bare trust" is just a way of holding cash or shares.
So building society accounts can be held in bare trust, as can bank accounts or NS and I index linked certs (when available- they aren't at the moment) or OEICS or Investment Trusts or gilts etc

Essentially you opt for cash in the building society/ bank, with capital certainty but inflation risk or in the stock market with capital uncertainty but hope of beating inflation or both.

When I was BT for a minor I used both.

anandp

Lol. The "want" for cash isn't mine. It's my son's grandparents.

I've had the same conversations but haven't won as yet. Giving them multiple options is what in trying to do!