Telephone: 0151 236 8200

Investing for Childen

"We all want the best for our families. As the cost of University, houses and weddings continue to rise, saving for the next generation is one of the most important decisions a family can make".

When choosing to save for your offspring, there are many things a family has to consider. It depends on your view as to how much financial responsibility you believe your offspring can handle when they reach 18 as to the most suitable option.

A Junior Individual Savings Account (JISA) is an investment account for children. It has to be opened by a parent or guardian, but grandparents or anyone else may make contributions up to the annual limit.

Children can also build up savings through pension plans including Self Invested Personal Pensions (SIPP). Each child can contribute, or have paid on their behalf, a maximum annual amount, with the Government paying an additional contribution. Like all pensions however this is long-term investment planning as access to capital is only available at age 55.

Further options to be considered are trusts. Bare trusts are the simplest form of trust arrangement, where one or more trustees hold the assets for the beneficiary. Once the beneficiary reaches the age of 18 they have the right to all of the capital and income of the trust. The tax treatment of a bare trust depends on whether the assets are put into trust by a parent or by someone else.

  • If someone other than the parent establishes the bare trust, the income and capital gains are assessed on the child.  This can be beneficial if the child’s income is less than the annual personal allowance.
  • If assets are put into a bare trust by a parent, the situation is different. If annual income of more than £100 is produced, the entire income is taxed as the parent’s income, not the child’s, until the child reaches 18.

Discretionary trusts are a more complex means of managing savings. They are set up by way of a gift from the settlor (for example the parent or grandparent) into the trust. The trustees (parents or grandparents can also be trustees) are responsible for the management of the trust assets.  They have discretion about how much income and/or capital is paid out, if any, which beneficiaries receive the payments, and how often the payments are made.

All of our core Investment Services are available and designed to make the investment of funds set aside for children simple.