Childrens' savings/investments/pensions

anandp

Thanks for clearing that up on the JISA front.
The issue with JISA's then is that if the grandparent opens one for their grandchild, and contributes to it - the only way I can also invest for my child in that way is to contribute to the same one. Though simpler overall from an admin standpoint, my preferred scenario would be to keep them separate.

Now for your other questions....

cloud_dog wrote: »

What I am missing is what you are trying to achieve? I think you are trying to decide on the vehicle to use to achieve what you want before you have a clear view as to what you want to achieve.

Trying to achieve investment growth through regular contributions on behalf of a grandparent to their grandchild. My parents essentially want to make a regular contribution to something they can be clear is from them to their grandchild. But their knowledge in this space is limited so they'd want me to decide where it goes, for the best growth, etc.

My ideal would be to create a Vanguard plan and stick it in a couple of index funds, but their minimum is £100pm.

As I see it you are looking to accommodate the grandparents who want to contribute monthly towards their grand child. What is their view on the use of their money, i.e. would they be happy for their money to go in to an investment (and run the risk of losing some money) or do they simply want a cash savings vehicle for the money? Are they looking for the money only to be accessed at age 18, or are they wanting for their money to be accessible whenever the child wants, if there is something in life they really, really want to purchase (within reason)? Basically what are their thoughts.

S&S only - no cash savings. As a later post said, I don't see the point.

My previous child has a BG account in a Bare Trust. But this was prior to JISA's.

Alexland

anandp wrote: »

The issue with JISA's then is that if the grandparent opens one for their grandchild, and contributes to it - the only way I can also invest for my child in that way is to contribute to the same one. Though simpler overall from an admin standpoint, my preferred scenario would be to keep them separate.

The grandparent cannot open a Junior ISA unless they are a guardian with parental responsibility. However once open the parent or guardian can provide the details to anyone including grandparents to contribute.

https://www.gov.uk/junior-individual-savings-accounts/open-an-account

https://www.gov.uk/junior-individual-savings-accounts/add-money-to-an-account

Alex

bowlhead99

If the grandparents want a separate dedicated pot which everyone knows is 'from them' and doesn't get co-mingled with other monies from other people, the simplest thing is probably to put it in bare trust (BG or other product) with grandparents or parents or both as trustees, and rely on the fact that the child does not have much in the way of their own income or capital gains so that in practice there is not much tax to worry about. If unrealised gains get large, they can be managed down through sale and repurchase of something else at a new higher base cost, within the annual exemptions. But as the contributions to the plan are relatively low (you mentioned Vanguard at £100pm being out of reach) there is not going to be a lot to worry about in terms of creating unmanageable gains or income for the child.

It also means the money could be accessed (by trustee on behalf of the child) before 18. If the contributions increase significantly (e.g an inheritance) and pot is becoming large by the mid-teen years, contributions or existing balances could be diverted into JISA, and then Adult Cash ISAs from age 16 - from which point £20k a year can be stuffed into ISA allowances to get it wrapped up for tax before the child is likely to see any significant income tax bill upon entering the world of employment and starting to have their salary use up their personal income allowance. If the potential income tax is not an issue because we're not talking huge figures, then the bare trust could still continue to be used.

Meanwhile the fact that the grandparents are not using the child's JISA allowance (keeping their money separate from everyone else's), means that the parents can use that wrapper for contributions from them and other friends/ relatives. The parents being free to use the JISA for their own gifts neatly avoids any issues with the rule about unwrapped investment income over £100 being taxed on the parent where it's sourced from a parental gift.

anandp

Great, thanks. Both responses very useful.

Ok, so assuming there's nothing more to add to this conundrum, the only question remaining is:

What children's plans out there exist that are as good as or better than BG?

xylophone

Below might be worth a look.

http://www.hl.co.uk/news/articles/archive/bare-trusts-tax-efficient-investing-for-a-grandchild

https://www.telegraph.co.uk/investing/funds/the-cheapest-index-tracker-funds---and-the-trick-to-cutting-cost/

https://www.charles-stanley-direct.co.uk/News_Features_Research/advantages-regular-savings/

https://www.charles-stanley.co.uk/sites/www.charles-stanley.co.uk/files/32.01%20Guide%20to_Investing%20for%20your%20children_140515.pdf

Mickygg

I'd say a cash JISA is best as you can get a rate at about 3%. Not bad in the current rubbish interest rate environment.
You could go for stocks and shares. I've chosen not to as in 16 years time I don't want a risk of that being in the Middle of a market slump. It will be an 18 years old birthday present to my child which I'm not risking.

Keep_pedalling

Mickygg wrote: »

I'd say a cash JISA is best as you can get a rate at about 3%. Not bad in the current rubbish interest rate environment.
You could go for stocks and shares. I've chosen not to as in 16 years time I don't want a risk of that being in the Middle of a market slump. It will be an 18 years old birthday present to my child which I'm not risking.

You don’t have to leave that to chance you have plenty of time to derisk in the last few years.

cloud_dog

Mickygg wrote: »

I'd say a cash JISA is best as you can get a rate at about 3%. Not bad in the current rubbish interest rate environment.
You could go for stocks and shares. I've chosen not to as in 16 years time I don't want a risk of that being in the Middle of a market slump. It will be an 18 years old birthday present to my child which I'm not risking.

So, why not after 12, 13, 14, 15 years start reducing the exposure to S&S, move it in to bonds, or cash, or cash equivalent so as to reduce or completely remove the risk element?

Assuming all goes well my plan is to move the S&S CTF in to a cash JISA from 15 years onwards.

Whilst a child can only have one JISA you can hold two versions, cash and S&S. If you wished to continue depositing these would need to share the annual allowance. I am a little unsure if the two versions need to be held by the same provider so, would need to check that out (if you wanted to retain the S&S option).

xylophone

In practical terms unless your child is both capable and willing to sue their own parents you can choose when to release the money. Indeed Bailie Gifford actually ask what age you plan to run it to (non-binding) so I said 21.

https://www.bailliegifford.com/en/uk/individual-investors/literature-library/individualintermediary-non-fund/investment-trust/childrens-savings-plan-supplementary-information/

**While the Bare Trust application form allows a later date to be provided for the duration of the Bare Trust than the date of the child's 18th birthday
(or 16th birthday if the child is in Scotland), please note that there is no certainty that the assets will remain in trust until that later date. This is
because, when a child reaches the age of 18 (or 16 if the child is in Scotland), that child has a legal right to hold the assets directly for his or her own benefit and can demand payment of the funds from the Trustees. While it might be expected that the child would respect the wishes of the
person(s) setting up the trust, there is is no obligation on the child to do so once he or she has reached maturity in the eyes of the law. Please
consult your tax adviser on this point.

As the child is the beneficial owner, any tax arising is charged on the child so that the child must be advised as soon as he becomes responsible for his own tax affairs.

It seems to me that unless the donors/parents are prepared to accept that access and control belong to the child at the age of 16/18, they should not use a Bare Trust.

Alexland

xylophone wrote: »

It seems to me that unless the donors/parents are prepared to accept that access and control belong to the child at the age of 16/18, they should not use s Bare Trust.

For us one of the advantages of the BG CSP account is that it can be setup without Bare Trust to retain control otherwise we would just add more into the Junior ISA.

Alex.