Children's Savings

l1qtaq

Hi - I'm looking for some advice about children's savings. I have 2 children aged 15 & 13 who are about to inherit £15k each to be used after they're 18. Apart from junior ISA's which won't allow me to put the whole sum away is there anywhere else I could put the money other than a run of the mill kids savings account? Thanks.

talexuser

Difficult. The junior isa will become their property at 18, same as the terms of the bequest as I understand your post. This does not give a lot of leeway for the 15 year old for investments, and maybe not enough time even for the 13 year old to avoid a risk of a market dip just before you want to cash in. However if they were ok with the idea of leaving a proportion for a longer timescale, and taking only enough at 18 for a holiday, second hand car, or deposit on a flat etc, then it might be worthwhile in possible returns ahead of inflation and savings rates over a longer time.

The safest route would be the best savings rates you can find today (including cash isas putting away £5760 this tax year and again next etc), but unfortunately this may well not keep up with inflation over 5 years. And check the best buy rates often and switch to get the best deals.

opinions4u

For "run of the mill" look at Lloyds, TSB, BoS or Halifax who are paying 3%.

For junior cash ISA, look at Halifax if one of the parents has a cash ISA with them (or is prepared to stick £1 in a cash ISA with them) to get 6%.

Beyond that, wait for Xylophone to come along and post options around bare trusts, investment trusts and junior stocks and shares ISA.

talexuser

As a personal suggestion, after explaining to the kids that some money should be looked on as for the longer term savings, car, flat etc, how about 10K in this years junior isa in an investment fund with a long term record of good dividend return like Edinburgh or Murray, and 5k in a savings account, put into cash isa next tax year if the rates are higher, as "enjoy" money when they reach 18?

But this is not advice, just an opinion, and you MUST all recognise the risks of the stock market in these unusual financial times. If you think most of the money will be needed for university, stick to savings accounts.

xylophone

I assume that the money is an absolute gift to each child and the money becomes their property as soon as it is released ( ie that the will does not say something along the lines of "such of my grandchildren as reach the age of 18..".) I also assume that the girls are resident in England.

If the above is the case, then you will hold the money in bare trust for each child.

At the most basic, you could simply use a child saving account for example http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/ opened in bare trust, and retained in bare trust until the child becomes 18

"If you’re a parent, grandparent, aunt or uncle, it’s never too early to start
saving for a child’s future. You can save when you want to or choose to put
away a regular amount each month with our Virgin Young Saver.

The Virgin Young Saver will be automatically transferred
into an appropriate adult savings account on 5th April,
following the child’s 16th birthday.

We will ask you whether the account should retain the
trustee status, in which case the interest must be paid
net, or, if the trustee status is to be removed – the child
may be eligible to register a form R85 in their own right."

Note the above- if your children are non tax payers, then you can register the R85 on behalf of each child and the interest will be paid gross.

However, if an account remains in bare trust after the 16th birthday then the R85 will be cancelled, the interest paid net and you as the parent must reclaim any overpaid tax on Form R40.

Once the child becomes 18 she can register an R85 if she is a non-taxpayer.

This might also become relevant if either child should ever become a taxpayer but be eligible for the 10% rate. http://www.hmrc.gov.uk/taxon/worked-examples.htm

Because the rate on the Halifax JISA is so good, you might still want to consider a Halifax JISA for yourself so that the girls can take advantage of the 6% rate.
http://www.halifax.co.uk/savings/accounts/cash-isas/junior-cash-isa/
https://www.gov.uk/junior-individual-savings-accounts/overview

You could start now, keep the balance in another account and fill in succeeding years as appropriate.

The time available to the age of 18 is short for the older child so there seems little alternative to cash even though interest rates are generally so low, and even for the younger one, stock market based investments might not be seen as too risky an option.

However, Investment Trusts, OEICS etc can be held in bare trust - example here http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/

Be aware that not all institutions will allow accounts to be held in bare trust- you would need to check.