Halifax Children's Reg Saver or Inv Trust Shareplans?

Newbie2saving

Hi all,

My Son's Halifax Regular Saver is reaching maturity and Halifax now allow you to rejoin by post, but before I sign up again (he has 3 yrs worth of max input ~£3,000) I am thinking there could be better saving plans out there. The Halifax one is a Regular Saver (6%aer).

I am looking towards Investment Trust saving plans such as F&C with Foreign and Colonial IT. This would be a monthly investment with a long term investment in mind (my DS is only 4yrs old) and could sign it to him to remove it from my estate, but still enable me to use it with the consent of the other trustees should I wish to for his 'expenses'. The contribution would range between £25-£100 / month.

He also has a CTF with the Sharecentre which is their SF Adventurous Fund. It has basically done very little in 4years after charges. Not sure to keep this where it is or move it to a FTSE tracker in the hope it would keep pace at least.

Any thoughts? Does anybody else invest in children's plans such as this?

NB. I have shareplans for IT's with Baille Gifford, Aberdeen and Invesco Perpetual, but only for myself.

Thanks very much for any thoughts / experience...

xylophone

My Son's Halifax Regular Saver is reaching maturity and Halifax now allow you to rejoin by post, but before I sign up again (he has 3 yrs worth of max input ~£3,000) I am thinking there could be better saving plans out there. The Halifax one is a Regular Saver (6%aer).

You have provided the capital? You are aware of the "£100 rule"?

With regard to a parent providing the capital for a bare trust in an IT, see http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/ and again note the "£100 rule".

It seems that it will be possible to transfer CTF to JISA in due course. http://www.thisismoney.co.uk/money/saving/article-2528285/Parents-able-transfer-CTFs-Junior-Isas.html This would enable a greater choice of product.

Newbie2saving

Yes I am with regards to cash, thanks for taking the time to reply. With the Halifax the money is only earning 3% on average as it is a Regular Saver and the other sums are % (although I think I can get 3% on them all now).

So how do people manage to do this? Do you just accept the tax payment? It seems as though it is a double whammy, taxed on my salary and then taxed by saving.

I am trying to ensure he has a little nest egg come 18 to plan for University (if that is what he wants), however I am still a novice so any advice is appreciated.

Newbie2saving

I suppose the only way is to add to the existing CTF in the hope it can be transferred to an ISA in future?

TIA...

xylophone

Yes I am with regards to cash, thanks for taking the time to reply. With the Halifax the money is only earning 3% on average as it is a Regular Saver and the other sums are % (although I think I can get 3% on them all now).

See this re £100 rule http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/

So how do people manage to do this? Do you just accept the tax payment? It seems as though it is a double whammy, taxed on my salary and then taxed by saving.

But isn't everybody?

You could regard your own ISA savings as "earmarked" for your child.

I am trying to ensure he has a little nest egg come 18 to plan for University

- regular saving in the CTF/JISA should achieve this?

Newbie2saving

xylophone wrote: »

See this re £100 rule http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/



But isn't everybody?

You could regard your own ISA savings as "earmarked" for your child.

- regular saving in the CTF/JISA should achieve this?

I suppose, just seems a low threshold for Children, but understand the purpose behind it.

I use my ISA allowance to Bed & ISA each year my S&S 'pot', but once again I think you are right the CTF does meet the purpose, I just find the rates really poor and the options around it. Anyway by 2015 this won't be an issue with JISA's being available.

Appreciate the discussion it has really helped me plan what steps to take next.

cloud_dog

Do you have CGT concerns currently??

Have you got most of your own investments in ISAs, are you actively running investments outside of ISAs which are going to incur CGT?

If you're not going to be realising significant gains outside of ISAs in any one tax year you could open a non-ISA account and arbitrarily designate it as being for your son. Similarly, what about your OH?

Just a thought.

Newbie2saving

I don't have any CGT issues. I have two cash ISAs fixed around 4.1% and two S&S ISA's one is old Cash ISAs which I transferred to HL (I suppose that is another story as I am so confused by the charges, must try the spreadsheet Snowman put together!), calling it my 'risk pot' as I try and learn the ropes, the other my IFA 'looks after' and this is the one I bed and ISA on an annual basis. I have a few IT shareplans as I mentioned with Aberdeen, Baillie Gifford, Invesco Perp and a Sharebuy scheme which I am trying to max out through work. Also have a S&S account with HL which has a 'dead' share in it (probably need to sell it otherwise will incur charges) and a monthly payment into a Blackrock Consensus.

My DH passed away a few years ago, hence why I am trying to ensure my little boy has no worries financially and can still have a nice enough lifestyle with no 'money blockers' which could hamper his choices in life.

Thanks for the response.

atush

Inv trust plans (in a JISA or not) would be better in t he long run.

cloud_dog

Sorry to hear of your circumstances.

The fact that you are currently B&Bing means you are already using some (hopefully) of your CGT allowance.

I would agree with atush that an investment option would be wise. As with everything in life it doesn't have to be all or nothing, Depending on the monthly amount in question you could split it between another Halifax Saver account and an investment in your son's name.

One of the most critical things to bear in mind is that with most 'bare trust' accounts the money becomes the property of the child on their 18th birthday so you may want to consider the implications of a young person gaining access to possibly a lot of cash on their 18th birthday. Some of this you could 'manage' as they near 18, i.e. lock it away in an account for another 2,3,4,5 years or something. But, it is one of the major elements to consider.

EDIT:
We don't have a lot of disposable cash so our solution and our solution was mentioned in this post:

EDIT: As an example... for our DD she has:
1) A savings account. Simple bare trust which she knows nothing of as yet and we deposit £50 pm in to that plus gifts for her
2) A Halifax savings account with a cash card which she puts money she earns (we don't do 'pocket money') in to and we add a simple £10pm
3) A CTF (pre-runner to JISA) which had a lump sum added initially and receives £50pm (this will stop at some point when we feel it is 'big enough' for an 18yo).
4) An investment account in OH name (basic rate tax payer) which we put in £150pm split across 3 funds. Both myself and OH know this money is for our DD. What, we don't know but it will be used to assist her.

Drp8713

xylophone wrote: »

See this re £100 rule http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/



But isn't everybody?

You could regard your own ISA savings as "earmarked" for your child.

- regular saving in the CTF/JISA should achieve this?

Does this only apply to interest as opposed to investment growth e.g in a bare trust? I found the below

_Skandia wrote:

Parental Settlements


One area often overlooked is the source of the money in relation to income tax. Where assets are placed under trust from parents for minor unmarried children, if gross income exceeds £100 per annum all of the income will be taxed as if it was the parents’. This is per parent (settlor), per child. For collective investments (unit trusts and OEICs), this applies to income that is distributed as well as income that is re-invested into accumulation units. Income below the £100 limit will continue to be assessed as the child’s income and taxed accordingly.
This has applied to bare trusts since 9 March 1999 and applies whether the income is paid to the child or not. For trusts created before this date which have not had any additional funds added, the £100 rule does not apply. Where the trust is a discretionary trust, the £100 rule will only apply where income is actually distributed from the trustees to the minor beneficiary.


Example – bare trust


Paul puts £5,000 into a bare trust for his son John and invests in a high yielding bank account. After one year the bank account pays interest of £500 gross and the bank deducts 20% (£100) at source. Paul is a higher-rate taxpayer and John a non-taxpayer. Despite the capital being in trust for John, Paul has an additional 20% to pay, ie another £100. As the income is only being rolled up inside the bank account, holding a cash investment through another structure, such as a single premium investment bond, may well avoid this tax complication. Once John reaches 18, he will be absolutely entitled to the capital and income and it will be taxed as his own.
If, in the above example, the interest is distributed to John when it arises, Paul will still be liable to income tax.
However, if Paul had invested in growth assets then the trustees would be able to utilise John’s own capital gains annual exempt amount, year on year, on any capital gain made inside the trust. Using a bare trust provides certainty for the settlor regarding who will benefit from the funds under the trust. This certainty may outweigh the lack of ability to vary the arrangement.
A discretionary trust will offer additional flexibility and a wider beneficiary class and avoid this issue where the income is accumulated.
However where either type of trust is used, care must be taken where the settlor is the parent of the beneficiary and the underlying investment may produce real income.



This article is based on Skandia’s interpretation of the law and HM Revenue & Customs practice as at June 2013. We believe this interpretation is correct, but cannot guarantee it. Tax relief and the tax treatment of investment funds may change. Skandia does not accept any liability for any action taken or refrained from being taken due to the information in this or related documents.

- See more at: http://www2.skandia.co.uk/Adviser/KnowledgeDirect/Tax--Trusts/Income-Tax/Income-tax-and-trusts--100-rule/#sthash.aFQVLMqM.dpuf