Saving for niece/nephew

matt4504

Hey everyone,

Hope you're ok. So my sister is pregnant and due in a couple of months. I want to save for the child every Christmas and birthday but I want to do it secretly. Is it possible to do anything for the child without getting the parents permission?

I know it sounds sneaky I just want it to be a surprise!

I'm not fussed if its a savings account or a pension.

Thanks!

Matthew

markwilkinson

Simplest answer is open a dedicated savings account in your own name.

You can then determine when to hand over the money.

somethingcorporate

markwilkinson wrote: »

Simplest answer is open a dedicated savings account in your own name.

You can then determine when to hand over the money.

Except if they are a tax payer then they will have to pay tax on any interest earned.

There is a child savings part of the website so try there as a starter for ten.

markwilkinson

somethingcorporate wrote: »

Except if they are a tax payer then they will have to pay tax on any interest earned.

There is a child savings part of the website so try there as a starter for ten.

Show me a link to a savings product, which is tax free, for children, which can be set up by someone who is neither a parent nor grandparent.

bowlhead99

I opened an investment 'designated account' for my nephew - I control and fund it but the account name is [my name] re: [child's initials].

My original thought was for it to be a 'bare trust' for the child who would be able to control it themselves on turning 18. However I then had the thought (before doing any 'trust' paperwork) that I'd prefer to dictate the timing of when he'd get any proceeds. So as of right now it's legally just one of my accounts with a designation on the end of it, and I'll pay any income taxes which may fall due, rather than reporting any annual activities to his parents for them to do it.

I'll revisit the arrangement when any siblings arrive, as it isn't very tax efficient on dividends received (I'm higher rate whereas the child does not have any other real income of his own), and the account is just with my regular broker so (while it's easy for me to see online and work with a 'mini me' portfolio as a bit of fun) it's relatively expensive in terms of ongoing charges for the small amounts in there. I couldn't really recommend it to anyone else for those reasons.

The point I was going to make was that even to do a 'designated account' to note that it should be separate from my regular account, the account opening form had to be accompanied by a certified copy of the child's birth cert (it's like opening a joint account, the institution has to do their anti-money-laundering checks on all beneficiaries). So I couldn't do it without the cooperation of one of the parents. In my case this wasn't an issue as they know about it.

As markwilkinson says, the absolute easiest thing to do is just to save the money in one of your own accounts. The downside to this is that you have to pay tax on interest/dividends each year, which even though small amounts is just money thrown away - you are gifting a few pounds or tens of pounds every year to HMRC when you would prefer to spend them on toys for the child or have them compound up in the account to be worth more. So that's not great.

Most efficient thing to do would be to have the parent open a junior ISA and put your contributions in there. Unfortunately they can only have one ISA in any one year and this limitation means you'll not be able to do this on the quiet- your funds will have to just get mixed in with whoever else wants to put cash in for the child each year, and be visible to the parents as and when you put them in.

Perhaps one solution would be to open (with parent's knowledge and consent) some investment account for the child's first birthday in the child's name but have the statements sent to you. Make it a non-ISA one, so it doesn't get in the way of their own plans - the 'only one ISA a year' rule mentioned above. The parents know you made a gift on day one but that the child won't get it until they're 16 or 18 or something, and will likely forget about it. Meanwhile in the background you keep adding to it monthly or on birthdays or whatever. Then when the child is 17 you can miraculously produce £4k to buy them driving lessons and a first car, because you've been stashing away £20 a month for 16 years.

I know the Invesco Perpetual Children's Fund takes regular contributions as low as £20 a month with one-off top-ups of £25 or more whenever you like. Just a thought.

Finally the advantage of making investments rather than savings for the child is that the interest rates on savings are low (because the capital is not at risk) and are ultimately unlikely to beat inflation over a long period like 16-18 years. If you don't beat inflation, 50 quid put away in the bank account now might seem a relatively big and generous number to you now, while not feeling very much to you or the child in 2030.

By contrast an investment fund should (with no guarantees) go up and down in value but beat inflation in the longer term, and be worth as much or more than where it started off, by the time it's eventually received.

atush

I would suggest (as the above post) you open an investment trust savings plan as a bare trust with the child as designee. Some start form as little as 20/month (invesco perpetual).

You really don't want to be saving in cash for 18 or more years. It will lose ground to inflation every year in real terms.