Children's Accounts what does it mean when they say all withdrawals must benefit the child.

papageo8

Hi there,
I am looking at putting some money into a children's account in addition to the 2x regular savers which are for your child's future (i.e Uni, driving lessons, deposit for house etc).
The new account will be more for a lump sum for spending on the child in the future i.e improving her bedroom (decorating, new bed, potentially switching to  a bigger room), school funds, holidays for us as a family etc. It could be a really big list but the idea is to earn a bit of interest and always have funds towards our child's needs that isn't coming from our day to day spending. 

My concern is that the rules are really ambiguous, are these legitimate reasons for withdrawal under the all withdrawals must benefit the child. Is it easy / difficult to prove or for banks to turn around and say that we don't think this is a legitimate expense therefore, withhold the funds?

Any guidance would be a great help.

Thrugelmir

Sounds as it's more for your use than the child's. 

eskbanker

I'm not aware of any hard and fast rules defining the meaning of 'benefitting the child' but at the very least would see there being scope for debate if you anticipate the money being used for "improving her bedroom (decorating, new bed, potentially switching to  a bigger room), school funds, holidays for us as a family etc", so IMHO it would be worth erring on the side of caution and keeping the money in your name if that's the sort of thing you have in mind.

A more extreme example was discussed in another thread a few months ago: https://forums.moneysavingexpert.com/discussion/6215675/junior-savings-closure

couriervanman

papageo8 said:

Hi there,
I am looking at putting some money into a children's account in addition to the 2x regular savers which are for your child's future (i.e Uni, driving lessons, deposit for house etc).
The new account will be more for a lump sum for spending on the child in the future i.e improving her bedroom (decorating, new bed, potentially switching to  a bigger room), school funds, holidays for us as a family etc. It could be a really big list but the idea is to earn a bit of interest and always have funds towards our child's needs that isn't coming from our day to day spending. 

My concern is that the rules are really ambiguous, are these legitimate reasons for withdrawal under the all withdrawals must benefit the child. Is it easy / difficult to prove or for banks to turn around and say that we don't think this is a legitimate expense therefore, withhold the funds?

Any guidance would be a great help.

You mean for the things all parents do without opening a kids account......i think you know the rules they are not hard to understand

Alexland

Thrugelmir said:

Sounds as it's more for your use than the child's. 

Some of those things such as a new bed, their place on a holiday, etc seem reasonably in the child's interest? If the money came from the parents in the first place then I don't see any harm in the child earning some better interest before the money is spent on them.

papageo8

Thanks for your advice. I think I will stay clear on this as an option.
To be fair I thought some of the comments were a bit harsh considering we are legitimately saving £2.4k a year into regular savers that will go to our child in the future. There aren't many parents doing that (£38k + interest be time they are 16), not bad really.

The other money lump sums are more ambiguous I will give you that, but I don't want to run into the extreme example as demonstrated earlier.

Thanks again all

[Deleted User]

Alexland said:

Thrugelmir said:

Sounds as it's more for your use than the child's. 

Some of those things such as a new bed, their place on a holiday, etc seem reasonably in the child's interest?

 You make your kids buy their own place on the family holiday? 

 What if they'd rather have a playstation. Would you leave them behind? 

Alexland

_shel said:

You make your kids buy their own place on the family holiday?

Yes - why not if it was money that I had previously given them for that purpose?

It's no different from me giving them money to go to the shop to buy a specific new toy - just a bigger delay.

The child will then get to keep all the interest for other things of benefit for them.

_shel said:

What if they'd rather have a playstation. Would you leave them behind? 

No the money would get spent as intended when it was given for the child's benefit.

papageo8

JamesRobinson48 said:

In any event it seems doubtful what purpose is served here as, under HMRC rules, where funds from a parent are deposited in a child's name, any interest exceeding an annual total of £100 is taxable on the parent.

Good to know, I didn't know that. We don't currently earn that but would if we deposited a lump sum in one of these accounts.

jimjames

papageo8 said:

JamesRobinson48 said:

In any event it seems doubtful what purpose is served here as, under HMRC rules, where funds from a parent are deposited in a child's name, any interest exceeding an annual total of £100 is taxable on the parent.

Good to know, I didn't know that. We don't currently earn that but would if we deposited a lump sum in one of these accounts.

You may want to look at both Junior ISAs and investments rather than cash savings if you are looking at a long period of time that would generate £38k from £2.4k per year. Over 10 years investments should do better than cash savings although no guarantees. Inside an ISA you are also protected from tax

papageo8

@jimjames I think that is a good idea actually.

Our 2x regular savers mature this month and drop from 3.5% to 1.45%. JISA are currently earning more and I am happy for that money to be locked away until they are 16. Makes good sense does that.