Partner Article

Junior ISAs – not the only way to save

Child Trust Funds were available to children born between 1 September 2002 and January 2011.

Under the savings scheme, the Government gave £200 to start the account and parents were then able to add amounts annually, with tax free growth, until the child reached the age of 18, at which point the child received the account.

However, their popularity waned because of the limited availability of funds and low returns and in November 2011 they were replaced by Junior ISAs.

However, both the Child Trust Fund and Junior ISAs have allowed parents to save for their children in a tax free environment, and not be caught for tax. Normally, where funds are provided by parents for direct investment for children or via a family trust and the income exceeds £100, the parent would be subject to tax on the income.

So, while the ability to transfer Child Trust Funds into more useable Junior ISAs will be welcome, what other options are there for saving for children?

Monies from grandparents or other family members are always welcome. They can be saved directly in the children’s name and the income and gains (if any) fall within the child’s personal allowance and capital gains exemption and are therefore likely to be tax free.

However, as with the Child Trust Fund and Junior ISA, the money is fully accessible to the children when they are 18 years old.

Alternative ways to keep funds under parental or other’s control, include using a trust (again settled by grandparents or other family members) where the funds could be used for the children’s maintenance and personal costs while under 18 years old.

If parents are happy to roll up funds under parental control until children are old enough, then a trust could be settled by parents or a personal investment company may be the answer. These could provide useful funding for university education or even the deposit on the first home.

Stakeholder pension savings provide even longer term savings for children.

There are many options available for saving for children, but which one is the most appropriate will depend on where the funds are coming from and when they are likely to be needed. It’s worth exploring the options.

This was posted in Bdaily's Members' News section by Baker Tilly .