Junior savings closure

Zocal

We opened a junior savings account with Virgin money for our son a few years ago. We want to close it to use the money towards buying a new house with his own room but have been told we can only close for the benefit of the child - obviously as we haven't been paying tax on the savings I guess. Does this count as for his benefit? What does count?
Thanks!

eskbanker

Zocal said:

We opened a junior savings account with Virgin money for our son a few years ago. We want to close it to use the money towards buying a new house with his own room but have been told we can only close for the benefit of the child - obviously as we haven't been paying tax on the savings I guess. Does this count as for his benefit? What does count?
Thanks!

What sort of account is it?  If your reference to no tax signifies that it's a junior ISA then under the scheme rules there's no chance of access before he's 18, but if it's a standard non-ISA account then it's not up to the provider to impose conditions on reasons for withdrawal.

bundoran

eskbanker said:

Zocal said:

We opened a junior savings account with Virgin money for our son a few years ago. We want to close it to use the money towards buying a new house with his own room but have been told we can only close for the benefit of the child - obviously as we haven't been paying tax on the savings I guess. Does this count as for his benefit? What does count?
Thanks!

What sort of account is it?  If your reference to no tax signifies that it's a junior ISA then under the scheme rules there's no chance of access before he's 18, but if it's a standard non-ISA account then it's not up to the provider to impose conditions on reasons for withdrawal.

I rarely disagree with Eskie, but I do now.

The money in the account belongs to the child.

The parents are proposing to take the child's money and spend it on buying a house which the parents will own.

The bank is exercising its duty of care in preventing the beneficiary of the account (if it is an account in trust with the parent[s] as trustee), or the direct holder of the account (if the account is in the child's own name and he operates it himself) having his money taken - even if that taking is being done by the parents who have decided that they can appropriate and use their child's money as if it is their own.

And to the OP: Don't you see the problem with your taking your son's savings? Doesn't it cross your mind that it is simply wrong?

phillw

Zocal said:

We opened a junior savings account with Virgin money for our son a few years ago. We want to close it to use the money towards buying a new house with his own room but have been told we can only close for the benefit of the child - obviously as we haven't been paying tax on the savings I guess. Does this count as for his benefit? What does count?
Thanks!

You can only close for the benefit of the child because you gave the money to your child. You didn't pay tax on it because it's no longer your money.
Will the child own the house?
Did you only pretend to give it to your child to avoid paying tax?

eskbanker

Yes, I don't disagree with the above posts - the money belongs to the son and can only be used for his benefit, but nevertheless I don't believe that this actually gives the bank the unilateral right to determine what does and doesn't 'count' if the trustees declare that a withdrawal is for his benefit.  Whether or not the trustees are correct in their interpretation is a separate issue....

thegentleway

I’m interested why people think it’s wrong?
The OP’s son is going to benefit from the house purchase as the OP has explained the son is getting their own room.
I get that if it was done to doge tax then that is wrong but assuming that no tax was due, what’s the issue?
The reason I ask is that I’m thinking of doing a similar thing. Open a children’s saving account to get better interest rate (not dodge tax as would be within allowance anyway). Why is that wrong? Surely if you’re better off so are your kids. Thanks for explaining.

md258

Do you think your child would give you their money (if they could choose) so that you can buy a house, potentially meaning that they can't afford a car or to go travelling when they are older? How would you feel if your parents had done the same?

In my opinion, once you have given the money to your child, it is their money to spend as they would wish (and MSE shouldn't be suggesting this as a savings strategy).

thegentleway

md258 said:

Do you think your child would give you their money (if they could choose) so that you can buy a house, potentially meaning that they can't afford a car or to go travelling when they are older?

My daughter is only 1 month old but I agree with you, I don’t think children should have to give up their savings. I’ll be putting her money gifts in a JISA (and I’ll be contributing to it as well). Her own money will be separate and I never plan to access it. I bought my first cars at auction for as little as £50 and went travelling on a shoe string. Helping my parents (and people in need) is a much higher priority to me than hoarding money for myself.

md258 said:

How would you feel if your parents had done the same?

If my parents needed my savings for a genuine emergency I would have given it to them. I would have felt great at being to help them. For a new house, I would expect them to pay me back.

So I agree with you that if you’ve given someone (including your child) some money (or anything else for that matter) then it’s theirs and you shouldn’t ask for it back/expect it back. However, we do seem to have different opinions on using children’s account as a saving strategy. I can’t see any downside for anyone from getting a bit more interest apart from the bank’s perspective. Maybe I’m biased because my taxes were used to bail banks out but the banks only offer better rates to children in the hope of getting their lifetime custom. It’s an incentive with no strings attached. Same as sign up bonuses. I’ve recently opened a bank account with Halifax for the £100 incentive then switched it 2 weeks later to Lloyds to get another £100. Is that also wrong? I’m not trying to argue with you by the way. I’m genuinely interested, I value ethics very highly; I think all the word’s wrong could be resolved with better ethics. Thanks,