Savings account for grandchildren

gardeningmum

Hi
I would like to open savings account for my 2 grandchildren.  I find it all a bit confusing and do not know whether it would be best to open it in my name, or would I get a higher interest in a childs account.  Rather put off a childs account as they look to get the money by the age of 18, which I think is too young.  Would rather it be 21.  Any help greatly appreciated

jaypers

I’ve looked into this too and it is confusing. If in your own name, tax liability is against you. If in the child’s name it has to be opened my the parent/legal guardian. Also need to consider what happens when they reach 18. For example, if a child ISA, it automatically gets released to them to do as they wish at 18. This may be fine, but they can do whatever they want with the money which may not be what’s intended. 

Personally think children’s investment ISA is the best thing but do some reading. Some good info about them on Hargreaves Lansdown site with ability for Grand Parents etc to be able to pay into it, but as mention earlier, parent/guardian has overall responsibility. 

wmb194

jaypers said:

I’ve looked into this too and it is confusing. If in your own name, tax liability is against you. If in the child’s name it has to be opened my the parent/legal guardian. Also need to consider what happens when they reach 18. For example, if a child ISA, it automatically gets released to them to do as they wish at 18. This may be fine, but they can do whatever they want with the money which may not be what’s intended. 

Personally think children’s investment ISA is the best thing but do some reading. Some good info about them on Hargreaves Lansdown site with ability for Grand Parents etc to be able to pay into it, but as mention earlier, parent/guardian has overall responsibility. 

"If in the child’s name it has to be opened my the parent/legal guardian." Not all banks/BSs. Last I checked Lloyds, Halifax and Barclays allowed other adults to open accounts for children.

If you want to keep it in your own name I'd suggest using an Isa.

@OP: These days children's accounts are usually paying less than adult accounts. Unless we're talking about massive sums of money, the only way to make it 21 would be to use an expensive and more hassle than it's worth discretionary trust. Ordinary children's accounts are far simpler and cheaper (usually free) bare trusts but the money will be theirs at 18 (16 in Scotland).

LHW99

Ordinary children's accounts are far simpler and cheaper (usually free) bare trusts

Although you do now have to register a bare trust with HMRC.

Albermarle

gardeningmum said:

Hi
I would like to open savings account for my 2 grandchildren.  I find it all a bit confusing and do not know whether it would be best to open it in my name, or would I get a higher interest in a childs account.  Rather put off a childs account as they look to get the money by the age of 18, which I think is too young.  Would rather it be 21.  Any help greatly appreciated

If they are young you should consider investing the money in a Stocks and shares JISA, as it will have plenty of time to ride out the ups and downs of the market. Here are details of one of the providers and some general info 
Junior ISA | Invest in a Junior Stocks and Shares ISA | Fidelity
Top junior ISAs: 4.95% children's ISA tax free - MSE (moneysavingexpert.com)
Here is a link to general info about savings for children
Top children's savings accounts: 5.8% interest (moneysavingexpert.com)

However if you do not want them to have the money at 18, then the only practical solution is to keep the money in your own name, and give it to them at a time of your choosing,

xylophone

Although you do now have to register a bare trust with HMRC.

Not necessarily - see

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23160

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23030

LHW99

xylophone said:

Although you do now have to register a bare trust with HMRC.

Not necessarily - see

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23160

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23030

I didn't realise that deposit accounts in a child's name would even be counted  / classified as a bare trust - probably my age, although there seems to be a suggestion in the links that its parents or guardians opening them. Hence why some banks perhaps restrict the accounts to parents / guardians.

I had to register a trust before I could open a children's account with AJ Bell, which chimes with the later comment in the first link that "The exclusion from registration at Sch3A(6A) only extends to trusts created when opening cash deposit accounts."

I suspect that the trust types described in the second link may not be relevant to the OP, but are interesting none the less.

xylophone

I suspect that the trust types described in the second link may not be relevant to the OP, but are interesting none the less.

No - I was just pointing out that to say that all  bare trusts need to be registered is too sweeping a statement.

wmb194

LHW99 said:

Ordinary children's accounts are far simpler and cheaper (usually free) bare trusts

Although you do now have to register a bare trust with HMRC.

Not bank/savings accounts, they're exempt from those rules.

wmb194

LHW99 said:

xylophone said:

Although you do now have to register a bare trust with HMRC.

Not necessarily - see

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23160

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23030

I didn't realise that deposit accounts in a child's name would even be counted  / classified as a bare trust - probably my age, although there seems to be a suggestion in the links that its (sic) parents or guardians opening them. Hence why some banks perhaps restrict the accounts to parents / guardians.

They're definitely not restricted in law to parents or guardians so it must be a choice the institution is making. As I wrote, it's not hard to find a bank willing to open a bare trust account for a non-parent/guardian trustee.

DiamondLil

If it's of any use @gardeningmum, I have general investment accounts, one designated for each grandchild. I started these with Charles Stanley, but transferred to Hargreaves Lansdown when the Charles Stanley charges began to sting. The investments are all in investment trusts, so no ongoing HL charges, just the dealing charge when I sell or buy.