ISA in my name for children

junglebook

Hi

I was wondering if anyone can help me. I have an ISA in my name of about £15k which is money for my children. I chose to save this way as better interest rates and I have control of the money BUT am thinking of changing this

I didn't want to move to a Junior ISA as I want some control of the money so what are the alternatives please?

Thanks!

macrae2100

I don't know of any alternatives I'm afraid, but Junior ISA's usually have far better interest rates than standard ISA's, so if I was you I'd transfer the money to junior accounts ASAP.

bowlhead99

Basically your choices are:

A) Save/invest in your child's name in a Junior ISA or pension - a tax protected wrapper with limitations on when they can get it, but you can't control it once they are adult age.

Save/invest in your child's name outside a tax wrapper (i.e. a simple children's account if savings, or a bare trust account with you as trustee if investment). That way you avoid the restrictions of the tax wrapper, and they probably have plenty of their own annual income allowance and capital gains tax allowance for it not to be an issue (with the sort of value you are talking about). However, if they earn more than £100 interest/income a year (per parent) on money that was funded by a parent, that income is taxable at the parent's tax rate. And still, as with A, you can't control it once they're adult age.

C) Save/invest in your own tax wrapper (ISA or pension) as you are already doing. Make them a gift later. This way you can control when they get it. In the meantime you have less tax allowances left for yourself, and - if you go the ISA route instead of pensions route - the money is considered part of your own assets for assessment of benefits, for creditors to chase in a bankruptcy, or for inheritance tax purposes in worst case scenario (if you and spouse have hundreds of thousands of pounds of assets).

D) Save/invest in your own name (perhaps in a 'designated' investment account that still belongs to you) which is not in a tax wrapper. You'll pay income tax and capital gains tax at your marginal rates once you've used your allowances. Depending on your circumstances the profits you make from investments might not be taxable anyway (i.e. if it is dividend income or capital gain within your annual allowance, rather than bank interest income). Still has the same issues as C where the money is officially yours for purposes of benefits means testing, creditors chasing you for bankruptcy, inheritance tax on death etc.

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Generally whichever one of those routes you take : if saving for children for a long period and not necessarily planning to give it them even when they hit 18, I would be investing (i.e. market-based investment funds) rather than using rainy day savings account.

Inflation can be expensive over long time periods, even if some children's accounts have nice interest rates. Picking something that has a nice savings interest rate does not future proof it, generally even by shopping around for good deals all the time you will only make a little bit more than inflation over the long term rather than actually grow it a lot in real terms. Obviously if they are 15 rather than 5, the choice might be different as you wouldn't want to take investment risks if you only have 3-4 years to recover from a market crash.