{"id":10580,"date":"2021-02-18T13:09:25","date_gmt":"2021-02-18T13:09:25","guid":{"rendered":"https:\/\/www.bbtgroup.co.uk\/portfolio\/?p=10580"},"modified":"2021-08-19T13:52:21","modified_gmt":"2021-08-19T12:52:21","slug":"saving-for-grandchildren","status":"publish","type":"post","link":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/saving-for-grandchildren\/","title":{"rendered":"Saving for Your Grandchildren &#8211; Is There a Better Way?"},"content":{"rendered":"<h3 align=\"justify\"><em>Financial Planner Robert \u2018Bob\u2019 Colebrook outlines the options available to investors looking to secure their grandchildren\u2019s futures.<\/em><\/h3>\n<p align=\"justify\">We all like the idea of spoiling our loved ones, whether that be money in a birthday card or a day out (when we are allowed!). Many grandparents will also open a savings account for their grandchildren when they\u2019re born, but with interest rates at record lows and prices rising year on year, this nest egg might end up being worth less than one would like by the time it\u2019s gifted. Investing is one method used to combat inflation, but what investments can you actually make on behalf of a child?<\/p>\n<p><!--more--><\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-10588 size-full\" src=\"https:\/\/www.bbtgroup.co.uk\/portfolio\/wp-content\/uploads\/2021\/02\/familyhome.jpg\" alt=\"\" width=\"1800\" height=\"500\" srcset=\"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-content\/uploads\/2021\/02\/familyhome.jpg 1800w, https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-content\/uploads\/2021\/02\/familyhome-300x83.jpg 300w, https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-content\/uploads\/2021\/02\/familyhome-768x213.jpg 768w, https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-content\/uploads\/2021\/02\/familyhome-1024x284.jpg 1024w\" sizes=\"(max-width: 1800px) 100vw, 1800px\" \/><\/p>\n<p align=\"justify\">Broadly speaking, there are three questions to ask oneself before choosing an investment vehicle for a child:<\/p>\n<ul>\n<li>- Am I concerned about tax (for either the child or myself)?<\/li>\n<li>- When do I want the child to receive the money?<\/li>\n<li>- What control do I want over the money up until this point?<\/li>\n<\/ul>\n<p align=\"justify\">The answer to these questions will determine the best product(s) to use. The most common ones are outlined below:<\/p>\n<p align=\"justify\"><strong>General Investment Account<\/strong><\/p>\n<p align=\"justify\">A General Investment Account (GIA) is an investment product normally used by investors who have already utilised their ISA allowance for the year. You need to be at least 18 years old to hold one, which means that a GIA opened for a child would need to be in your name. There is no limit to how many GIA\u2019s you can open, however, or how much you invest in them.<\/p>\n<p align=\"justify\">As the investment will be in your own name, you retain complete control over the money saved. This might suit you if you want to gift the money to the child in tranches, or if you want to be able to wait until you\u2019re comfortable that they will spend it responsibly. The main downside of a GIA is the tax implications \u2013 any income received is taxable, as is the growth when you withdraw\/gift the money (subject to your own tax allowances). It also forms part of your estate, so there could be Inheritance Tax implications.<\/p>\n<p align=\"justify\"><strong>Junior ISA<\/strong><\/p>\n<p align=\"justify\">Many of us will remember the Child Trust Fund (CTF) into which the government gifted a lump sum when a child was born. Whilst the products still exist, the government is much less generous these days, and CTF's have been superseded by the new \u2018Junior\u2019 ISA (JISA). It\u2019s not possible to hold both a CTF and a JISA, but any existing CTF funds can be transferred into the new policy.<\/p>\n<p align=\"justify\">A JISA follows many of the same rules as an adult ISA \u2013 it can either be cash or stocks and shares and you don\u2019t pay tax on any capital growth or income\/interest received. There are some differences, however: the JISA allowance is only \u00a39,000 p.a. compared to the adult ISA\u2019s \u00a320,000 and the policy in administered differently. A JISA needs to be opened by the parent of the child and they are responsible for the account until the child turns 18, at which point the policy will automatically convert into an adult ISA and the child will gain full control of the money. Whilst much more tax-efficient than a GIA, this might not be ideal for a grandparent who wants to retain some control over the savings.<\/p>\n<p align=\"justify\"><img decoding=\"async\" class=\"wp-image-10589 aligncenter\" src=\"https:\/\/www.bbtgroup.co.uk\/portfolio\/wp-content\/uploads\/2021\/02\/savings-account-compound-interest.png\" alt=\"\" width=\"624\" height=\"347\" srcset=\"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-content\/uploads\/2021\/02\/savings-account-compound-interest.png 450w, https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-content\/uploads\/2021\/02\/savings-account-compound-interest-300x167.png 300w\" sizes=\"(max-width: 624px) 100vw, 624px\" \/><\/p>\n<p align=\"justify\"><strong>Personal Pension<\/strong><\/p>\n<p align=\"justify\">Starting a <strong><a href=\"https:\/\/www.bbtgroup.co.uk\/portfolio\/pensions-in-retirement\/\">pension<\/a><\/strong> for a child might seem a bit premature but actually, an individual can have a pension opened on their behalf from the day that they are born!<\/p>\n<p align=\"justify\">Much like a JISA, income and growth within a pension is tax-free. Unlike a JISA, contributions into a pension receive tax relief. An individual with no earnings can contribute (or have contributed on their behalf) up to \u00a32,880 per year into a pension, to which the government will award tax relief of 20% of the gross contribution (up to \u00a3720) into the pension.<\/p>\n<p align=\"justify\">The main drawbacks to a pension are how and when the child will be able to withdraw the money. The minimum age that an individual can make a withdrawal from a pension lags 10 years behind the State Pension Age, which increases regularly. It wouldn\u2019t, therefore, be unreasonable to assume that a child born in 2021 won\u2019t be able to access money saved in a pension until they\u2019re in their 60\u2019s. This isn\u2019t necessarily a reason to dismiss the product, however; after turning 18, the child can take over management of the pension and, depending on the amount contributed and the investment growth achieved, could be looking at a sizeable pot by the time they come to access it.<\/p>\n<p align=\"justify\">The final consideration should still be the taxation. As previously mentioned, there is no tax on the investment growth within the pension, but withdrawals are subject to Income Tax. After the initial 25% tax-free lump sum, any income drawn from the pension will be taxed at the child\u2019s marginal rate of (between 20% and 45%).<\/p>\n<p align=\"justify\"><strong>Which to choose?<\/strong><\/p>\n<p align=\"justify\">Clearly, each product has its own benefits and drawbacks and you may well want to combine them to create the perfect gift for your loved ones. Nevertheless, such financial decisions can be complex and the implications far-reaching, making it essential that you fully understand the options laid out in front of you. We would always recommend speaking with a professional before making such decisions. After all, it\u2019s not just your money anymore!<\/p>\n<p align=\"justify\"><a href=\"https:\/\/www.bbtgroup.co.uk\/team_advisers.html#robertcolebrook\"><img decoding=\"async\" class=\"alignleft wp-image-10586 size-thumbnail\" src=\"https:\/\/www.bbtgroup.co.uk\/portfolio\/wp-content\/uploads\/2021\/02\/RobertColebrook-150x150.jpg\" alt=\"\" width=\"150\" height=\"150\" \/><\/a><\/p>\n<p><strong>Robert Colebrook DipFA AwPETR<\/strong><br \/>\n<strong>Financial Planner<\/strong><\/p>\n<div>\n<p style=\"text-align: center;\" align=\"justify\"><strong><em>Read more of our articles about investments <a href=\"https:\/\/www.bbtgroup.co.uk\/portfolio\/category\/investments\/\">here<\/a><\/em><\/strong><\/p>\n<p align=\"justify\"><em> Information is based on our current understanding of taxation, legislation, and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.<\/em><\/p>\n<p align=\"justify\"><em>The scenarios included are for information purposes\/general guidance only and should not be interpreted as advised recommendations.<\/em><\/p>\n<p align=\"justify\"><em>A pension is a long-term investment - the fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.<\/em><\/p>\n<p align=\"justify\"><em>The value of investments and income from them may go down. You may not get back the original amount invested.<\/em><\/p>\n<p align=\"justify\"><em>Past performance is not a reliable indicator of future performance.<\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Financial Planner Robert \u2018Bob\u2019 Colebrook outlines the options available to investors looking to secure their grandchildren\u2019s futures. We all like the idea of spoiling our loved ones, whether that be money in a birthday card or a day out (when we are allowed!). Many grandparents will also open a savings account for their grandchildren when [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,4,3],"tags":[],"class_list":["post-10580","post","type-post","status-publish","format-standard","hentry","category-adviser-article","category-investments","category-pensions"],"_links":{"self":[{"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/posts\/10580","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/comments?post=10580"}],"version-history":[{"count":12,"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/posts\/10580\/revisions"}],"predecessor-version":[{"id":10930,"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/posts\/10580\/revisions\/10930"}],"wp:attachment":[{"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/media?parent=10580"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/categories?post=10580"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bbtgroup.co.uk\/clientportfolio\/wp-json\/wp\/v2\/tags?post=10580"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}