Childrens Education Fund Cheque/Current Account for under 11's

DaftMule

My father-in-law has been told by his adviser that the simplest way to contribute to an education fund for our kids (his grandchildren) is for us to open a current account for each child. The grandparent can then put money into each account to go towards school/university fees.

This was news to me as I thought grandparents could only gift around £3,000 a year without incurring all sorts of tax liabilities. It sems this is not the case however ther are some important citeria:

1. Must be a current/cheque account
2. It must not attract interest
3. It must be named appropriately e.g. "Joe Bloggs Education Account"
4. Money paid into the account must come from income (preumably from employment or pension income).
5. Crucially, there must, over time, be a presedent set of regular payment into the account..

Unfortunately, I have stumbled at the first with this plan as it seems impossible to open a current account for a child under 11. The only accounts available for under 11's are basically accounts in trust and they seem to be savings accounts or get paid interest anyway, e.g the Santander 1/2/3 Mini Account (In Trust).

Does anyone have any experience of this method to allow grandparents to contribute to education fees? It sounds like a simple option but impossible if no financial instiution offers an appropriate account these days.

Thanks.

grumbler

Did you read the MSA article?

• Best Children's Savings
  
  

DaftMule

grumbler wrote: »

Did you read the MSA article?

• Best Children's Savings
  
  

Umm...as per my orginal post, the whole point is this should NOT be a savings account for my kids

grumbler

Well, it was a vary vague point. So were the criteria.

What do you want actually - in terms of the result, not of the way of achieving it?
It may be just me, but I still don't understand why you think a saving account isn't good for "grandparents to contribute to education fees".

xylophone

If Inheritance Tax is the consideration and your father wishes to gift more than £3000 a year, then "regular gifts from income" makes sense.

I can't see any reason why he should not make the gifts into an interest bearing account for each child?

There is no reason why you should not open an account in the name of each child and hold it in bare trust for that child. The money would be an absolute gift to the child and belong to him absolutely but as Trustee you would be able to access it and use the money strictly for the benefit of that child.

For example, see http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/

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

We’ll ask you whether you want the account to retain the trustee status.

You would keep records to show exactly how the money was spent.

There is a limit of £25,000 in the account but if you are using it for school fees on a regular basis this should not prove a problem.



Remember that the child will be entitled to access and control at age 18.

If the money is required for age 18 plus, your father could consider contributing to a JISA for each child.

Be aware however that the child is entitled to control of a JISA at 16 and access at age 18.

Grandfather could contribute both to the JISA and to the savings account.

JuicyJesus

I don't think a product exists that has your criteria. Even naming the account something odd is probably not going to be possible.

Marchitiello

RBS let you open an account for child's 7+ were you can select for them to have direct access and be solely on their name. It is in theory a saving account (1% interest) but is the only one I could find were my son (now 8) can actually deposit and withdraw by presenting his own ID, and it is helping him understanding about banking and finances.

JuicyJesus

Marchitiello wrote: »

RBS let you open an account for child's 7+ were you can select for them to have direct access and be solely on their name. It is in theory a saving account (1% interest) but is the only one I could find were my son (now 8) can actually deposit and withdraw by presenting his own ID, and it is helping him understanding about banking and finances.

The OP doesn't want savings accounts or interest though.

Hence the issue. There are plenty of children's accounts, it's just none of them meet the OP's frankly bizarre criteria.

Marchitiello

JuicyJesus wrote: »

The OP doesn't want savings accounts or interest though.

Hence the issue. There are plenty of children's accounts, it's just none of them meet the OP's frankly bizarre criteria.

I understand and Agree with you but the RBS one is the only one I found with direct access. The non paying interest element is also not really controllable as there was a time where all Bank paid some interest on current accounts, 0.1 or something, but still interest, and those times could come back if base interest rates get back to 7+ %

DaftMule

Thanks for the replies. The criteria for the account are what my FiL was told. The "no interest" part does sound odd to me as I doubt there is any account that gives none at all. Also, the kids get their personal allowance just like anyone else.

I have asked my FiL to revisit this with his adviser to try and get some more details and hopefully some examples of acceptable accounts.

JuicyJesus

I think whoever told your FIL the criteria is bonkers, personally. Plenty of grandparents save for their grandchildrens' educations in bog standard children's savings accounts without having to meet a list of requirements like that - and as you say, no interest does seem a bit odd (would he prefer that the amount dwindle over time due to inflation?) and the requirements around the money having to come from income are just bizarre (and, more to the point, impossible to prove with certainty).