Investments for Children
Discussion
Hi All,
I've got a four year old that I'd like to start putting some savings away for. My ex wife already holds a cash ISA and a stocks and shares ISA for her, I'm reluctant to add to this as my ex has control of it.
I could put some money into a savings account but need to be careful it doesn't cause an issue with my savings allowance from what I'm reading.
I'm thinking of paying into a Junior SIPP instead, we're not talking big sums here, I've got probably £3k to open it with then put £50 a month into it.
What do you think would be best?
I've got a four year old that I'd like to start putting some savings away for. My ex wife already holds a cash ISA and a stocks and shares ISA for her, I'm reluctant to add to this as my ex has control of it.
I could put some money into a savings account but need to be careful it doesn't cause an issue with my savings allowance from what I'm reading.
I'm thinking of paying into a Junior SIPP instead, we're not talking big sums here, I've got probably £3k to open it with then put £50 a month into it.
What do you think would be best?
For my girls, I opened Halifax Kids Monthly Savers (paying 5% interest just now) - https://www.halifax.co.uk/savings/kids/kids-monthl...
I then took the money after 12 months and put it into Intelligent Money JISAs for them and contribute £50 a month to those.
They've also got some Premium Bonds which haven't done great but the prospect of a big win is quite fun.
I then took the money after 12 months and put it into Intelligent Money JISAs for them and contribute £50 a month to those.
They've also got some Premium Bonds which haven't done great but the prospect of a big win is quite fun.
Colonel Cupcake said:
I thought, with a JISA, that the money can only be withdrawn by the child when they reach 18 (death and terminal illness aside)?
A junior SIPP is also a good idea, though. Compounding can do wonders over 50 or so years.
To me that's a positive. Why would you want a teenager to take out their/your money and most likely piss it up the wall? A junior SIPP is also a good idea, though. Compounding can do wonders over 50 or so years.
Colonel Cupcake said:
A junior SIPP is also a good idea, though. Compounding can do wonders over 50 or so years.
^^^^ This, this and this.The tax free compounding in an ISA often doesn't have much benefit to a child who wouldn't be an income tax payer and can grind away any capital gains using the annual allowance. However, the additional tax relief on a SIPP is effectively 20% free money from the government which then compounds tax free for 50 years. You can't do much better than that!
Also, as a young adult if someone already has a SIPP ticking along it reduces the financial pressure in a household that eventually takes on a mortgage
which might, in the early years, struggle to fund a pension at the same time.
Panamax said:
Colonel Cupcake said:
A junior SIPP is also a good idea, though. Compounding can do wonders over 50 or so years.
^^^^ This, this and this.The tax free compounding in an ISA often doesn't have much benefit to a child who wouldn't be an income tax payer and can grind away any capital gains using the annual allowance. However, the additional tax relief on a SIPP is effectively 20% free money from the government which then compounds tax free for 50 years. You can't do much better than that!
Also, as a young adult if someone already has a SIPP ticking along it reduces the financial pressure in a household that eventually takes on a mortgage
which might, in the early years, struggle to fund a pension at the same time.
If you're looking at pensions for children, there will probably be cheaper options that a SIPP. An Aviva stakeholder pension is a simple cheap option.
https://www.aviva.co.uk/retirement/aviva-stakehold...
https://www.aviva.co.uk/retirement/aviva-stakehold...
EddyP said:
Hi All,
I've got a four year old that I'd like to start putting some savings away for. My ex wife already holds a cash ISA and a stocks and shares ISA for her, I'm reluctant to add to this as my ex has control of it.
I could put some money into a savings account but need to be careful it doesn't cause an issue with my savings allowance from what I'm reading.
I'm thinking of paying into a Junior SIPP instead, we're not talking big sums here, I've got probably £3k to open it with then put £50 a month into it.
What do you think would be best?
If my maths is correct your initial £3k will be in breach of their annual allowance once tax relief is added. I've got a four year old that I'd like to start putting some savings away for. My ex wife already holds a cash ISA and a stocks and shares ISA for her, I'm reluctant to add to this as my ex has control of it.
I could put some money into a savings account but need to be careful it doesn't cause an issue with my savings allowance from what I'm reading.
I'm thinking of paying into a Junior SIPP instead, we're not talking big sums here, I've got probably £3k to open it with then put £50 a month into it.
What do you think would be best?
I currently do £80 per month for 3 step daughters and 5 grandkids aged 3 to 12. The grandkids always get started within a month of their birth so the older ones have a tidy pot so far.
Govt adds £20 to each contribution within 8 weeks or so.
i4got said:
If you're looking at pensions for children, there will probably be cheaper options that a SIPP. An Aviva stakeholder pension is a simple cheap option.
https://www.aviva.co.uk/retirement/aviva-stakehold...
This is also worth looking at. https://www.aviva.co.uk/retirement/aviva-stakehold...
i4got said:
If you're looking at pensions for children, there will probably be cheaper options that a SIPP. An Aviva stakeholder pension is a simple cheap option.
https://www.aviva.co.uk/retirement/aviva-stakehold...
The aviva is 1%.https://www.aviva.co.uk/retirement/aviva-stakehold...
HL is half that
“account charge Junior SIPP charges
The annual charge for holding investments in an HL Junior SIPP is never more than 0.45%.”
https://www.hl.co.uk/pensions/junior-sipp
Also worth considering that if you start a pension early, to allow the child to defer pension expenditure, they may also then lose out on co-contributions from an employer or other future incentives.
Or if a pension saving becomes mandatory, like forced auto-enrolment.
You could end up just leaving your child no better off until they reach the LTA in say 2060, years before retirement, and then struggling with other tax incentives/complications.
I’m of the view that a fund for early adulthood is more valuable and more understandable in value.
Ie, start a business. Deposit for a nicer house, etc.
But yes, the risks with JISA and the kid spending it all on rubbish.
Is there no way to simply keep them in the dark about it?
Or if a pension saving becomes mandatory, like forced auto-enrolment.
You could end up just leaving your child no better off until they reach the LTA in say 2060, years before retirement, and then struggling with other tax incentives/complications.
I’m of the view that a fund for early adulthood is more valuable and more understandable in value.
Ie, start a business. Deposit for a nicer house, etc.
But yes, the risks with JISA and the kid spending it all on rubbish.
Is there no way to simply keep them in the dark about it?
CoolHands said:
i4got said:
If you're looking at pensions for children, there will probably be cheaper options that a SIPP. An Aviva stakeholder pension is a simple cheap option.
https://www.aviva.co.uk/retirement/aviva-stakehold...
The aviva is 1%.https://www.aviva.co.uk/retirement/aviva-stakehold...
HL is half that
“account charge Junior SIPP charges
The annual charge for holding investments in an HL Junior SIPP is never more than 0.45%.”
https://www.hl.co.uk/pensions/junior-sipp
EddyP said:
Hi All,
I've got a four year old that I'd like to start putting some savings away for.
... What do you think would be best?
I've got a four year old that I'd like to start putting some savings away for.
... What do you think would be best?
Perhaps another possibility might be generous grandparents.
Gifts from grandparents (possibly anyone other than parents), counts as the childrens own money (unlike gifts from parents).
Therefore the normal tax free allowances apply immediately.
I give shareholdings to grandchildren.
Use the designated account system.
It worked really well a generation ago, eventually providing part school fees and also paid the university fees (meaning no student loans) all from the accumulated investment income. University fees were much lower then, than they are now.
Felt a certain obligation to follow that same system, one generation later.
Was not interested in a pension for them. That is for them to arrange. Thought help with a good start to adult life makes more sense.
Edited by Jon39 on Sunday 12th March 10:03
Designated accounts are a bit of a bugbear of mine.
My father set some up with Fidelity over the past 10-20 years for his grandchildren under ‘advice’ from the family IFA.
In the absence of a suitable contemporary paper trail, there is nothing intrinsic within a designated account that defines it as a bare trust (conferring legal ownership by the grandchild) and therefore who’s to say whether the funds belong to the the account t holder(s) as the designee is could be ‘offspring 1’, ‘Ferrari Fund, or ‘cheese sandwich’.
With Fidelity, they will only ever release funds back to the account holder as any alleged beneficiary of and alleged bare trust is not their customer.
A possible workaround is to ensure that when funds are liquidated, the account holder immediately transfers the proceeds to the grandchild (exact £ and pence avoiding the tentation to round the proceeds up etc.) to lend weight to the asserting that they have been acting as the child’s trustee.
The downside risk is that the accounts could be considered to be assets of the account holder (grandfather) with negative SA and potentially IHT implications.
Fidelity are not in my good books as they have increased their account fees recently and want to charge £75 pa for each individual designated account where previously that just charged one lower account fee per account group (if there were joint holders).
One thing positive about Fidelity is that their accounts may be free for under 18s (junior ISAs etc) but the point is that fees and costs can be material, especially over the longer term and it would pay to keep an eye on the market and be prepared to switch as we can assume that costs will ultimately come down across the industry but you rarely benefit unless you are prepared to switch.
My father set some up with Fidelity over the past 10-20 years for his grandchildren under ‘advice’ from the family IFA.
In the absence of a suitable contemporary paper trail, there is nothing intrinsic within a designated account that defines it as a bare trust (conferring legal ownership by the grandchild) and therefore who’s to say whether the funds belong to the the account t holder(s) as the designee is could be ‘offspring 1’, ‘Ferrari Fund, or ‘cheese sandwich’.
With Fidelity, they will only ever release funds back to the account holder as any alleged beneficiary of and alleged bare trust is not their customer.
A possible workaround is to ensure that when funds are liquidated, the account holder immediately transfers the proceeds to the grandchild (exact £ and pence avoiding the tentation to round the proceeds up etc.) to lend weight to the asserting that they have been acting as the child’s trustee.
The downside risk is that the accounts could be considered to be assets of the account holder (grandfather) with negative SA and potentially IHT implications.
Fidelity are not in my good books as they have increased their account fees recently and want to charge £75 pa for each individual designated account where previously that just charged one lower account fee per account group (if there were joint holders).
One thing positive about Fidelity is that their accounts may be free for under 18s (junior ISAs etc) but the point is that fees and costs can be material, especially over the longer term and it would pay to keep an eye on the market and be prepared to switch as we can assume that costs will ultimately come down across the industry but you rarely benefit unless you are prepared to switch.
Mogul said:
Designated accounts are a bit of a bugbear of mine.
My father set some up with Fidelity over the past 10-20 years for his grandchildren under ‘advice’ from the family IFA.
My father set some up with Fidelity over the past 10-20 years for his grandchildren under ‘advice’ from the family IFA.
Direct shareholding designated accounts, not Fidelity.
When I had dealings with Fidelity many years ago, they demonstrated how an imbicile behaves.
Hopefully they might have improved since then.
Are you already using up your own ISA allowance each year?
If not best option I think is to keep it in your own name in an ISA.
You then have full choice in when to tell or give it to them, whether that is 18, 21 or (possibly) 58!
I think it'll be the most useful to the offspring at house buying time, then JISA is too early and SIPP is way too late. There is a risk you might be within 7 yrs of death by then (if IHT is an issue), but hopefully not, and that's something you can review closer to the time.
If not best option I think is to keep it in your own name in an ISA.
You then have full choice in when to tell or give it to them, whether that is 18, 21 or (possibly) 58!
I think it'll be the most useful to the offspring at house buying time, then JISA is too early and SIPP is way too late. There is a risk you might be within 7 yrs of death by then (if IHT is an issue), but hopefully not, and that's something you can review closer to the time.
tendown said:
Are you already using up your own ISA allowance each year?
If not best option I think is to keep it in your own name in an ISA.
You then have full choice in when to tell or give it to them, whether that is 18, 21 or (possibly) 58!
I think it'll be the most useful to the offspring at house buying time, then JISA is too early and SIPP is way too late. There is a risk you might be within 7 yrs of death by then (if IHT is an issue), but hopefully not, and that's something you can review closer to the time.
Don’t you then instantly lose 40% to HMRC if you die before passing it on?If not best option I think is to keep it in your own name in an ISA.
You then have full choice in when to tell or give it to them, whether that is 18, 21 or (possibly) 58!
I think it'll be the most useful to the offspring at house buying time, then JISA is too early and SIPP is way too late. There is a risk you might be within 7 yrs of death by then (if IHT is an issue), but hopefully not, and that's something you can review closer to the time.
Yikes!
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