Saving for my grandchildren without their parents knowing

DairyQueen

My parents and I have been saving on behalf of my nephews (now aged 15 and 13) since the eldest was born. Their parents are not 'savers' and it was important for us that neither parents nor children had access to the funds.

Initially we opted for Building Society child savings accounts with me as trustee. Over time the admin became more-and-more onerous. The identity checks (me and children) weren't worth the pittance in interest.

Eventually I lost patience with the admin hurdles/lowly returns and transferred the lot into an ISA. A JISA wasn't possible as the parents would have needed to open and manage, and there is no way that my older nephew would resist the temptation to blow the lot when he turns 16 next year.

We opted for an S&S ISA in my father's name. We are the savers/investors and we reserve the right to control when the children receive the cash and how it is spent. It is intended for something significant (uni funds, car, house deposit) and not to be used to plug parents' cashflow issues or 'wasted' on gadgets/games/iphones/other short-term stuff.

If my father dies the ISA will be inherited by mother. No issues there. Parents estate will be way below the IHT threshold so also no issues around gifting when the time comes.

Unfortunately, savings for children are predicated on their parents being the only/best parties qualified to save and invest on their behalf. The reality is that parents are no more qualified to do so than any other demographic.

xylophone

I don't see where the OP said he opened an account in the grandchildren's names 16 years ago, *held in bare trust*.

He said that he opened " Halifax child accounts" not that he opened accounts which were his accounts and  merely designated in the child's favour.

In the old days, an R85 would have been completed for such accounts (provided that  the capital had not been provided by a parent and would earn more than £100 in interest).

And even if it had been provided by a parent who had to pay tax on the interest, this would not prevent the capital in the account and the interest earned on it from belonging to the child.

From the Halifax re the child regular saver.

https://www.halifax.co.uk/savings/kids/kids-saver.html

Bear in mind:

• To open and manage an account in trust for a child you must be 18 or over and a resident in the UK. The child must be 15 or under.
• If you aren’t a parent or legal guardian of the child you need the permission of a parent or legal guardian to open this account.
• Once the account is open we’ll send a letter to the child’s address informing the parent or legal guardian of this. If a parent or legal guardian of the child tells us they don’t want this account open, we’ll close it and return the money saved.
• The minimum opening deposit is £1.
• Two Kids’ Saver accounts can be held for any one child.

I would suspect that the "parental permission" may have come in with stricter data protection rules.

xylophone

And note (from OP's first post)

The 16 year old's account has now changed to a normal low paying interest savings account 

From the Halifax

Before the child’s 16th birthday we’ll write to you to tell you that the account will change to an Everyday Saver account, which currently has an interest rate of 0.01%. You will hold this in trust for the child.
If you want the money to go into another account for the child we’ll let you know how to do this.

SandyN21

Hi..yes back in those days all I needed were their birth certificates which I had because their parents gave me spare copies in case they lost their copies.  Both the accounts are set up in my grandsons names and I was also allowed to give my address for all correspondence to be sent to. Each account has £8,000 as I topped them up after I took early retirement/redundancy last year.  The Halifax Children's account currently pays 1.44% up to £4,999 up to the age of 16.  So now the eldest grandson's account has reverted to a low interest rate of 0.01%.
I am not a tax payer so not sure if this will make a difference as what to do next.  The reason I do not want their parents to know about these accounts is that they will probably want to keep dipping into them and this is not the reason I set them up.

wmb194

In my experience if you have valid birth certificates then opening accounts with Barclays should be easy and unlike LBG Group it doesn't insist on writing to the children when the reach a particular age or obtaining parents' permission as some banks seem to want. Its children's accounts are fairly competitive, too, with the instant access one paying 1.5% on balances up to £10,000 and a £100pm regular saver offering 3.5%.

xylophone

I am not a tax payer so not sure if this will make a difference as what to do next. 

No, it makes no difference because these accounts for your grandchildren are held by you in "bare trust" for them.

The children are the beneficial owners of the accounts and the interest is taxable on them, not on you.

https://www.taxinsider.co.uk/the-bare-essentials-bare-trusts