Aspen Financial Planning

One of the things we all think about as parents is how we might do the best for our children in providing for their future. With that in mind, Aspen Financial Services has pulled together this handy summary of some of the key options for children’s savings. If you’d like to discuss the options available to your family further, then just give them a call on 020 8943 8121.

1. Junior ISAs 

Individual children’s savings accounts (ISAs) are now available, and are known as Junior ISAs. These are long-term, tax-free savings accounts. Junior ISAs are only available for children up to the age of 18, and the money cannot be withdrawn until the child’s 18th birthday. Anyone can contribute to the account, although the total amount that can be invested during a single tax year is capped at £3,600 (2014/15).

2. Child Savings Bonds

These are offered by friendly societies and allow parents, grandparents, other relatives and friends to all save up to £25 a month on behalf of each child with the benefits then being earned free of further tax. The bond must have a minimum term of 10 years, up to a maximum of 25 years. The contributions must be maintained to earn the tax benefits. However, they do offer a valuable alternative, particularly if you are not the child’s actual parent.

3. Pensions

These are a niche choice for investing for children, but can provide a solution in certain circumstances. Investments into a pension attract tax relief on the way in, but tax is payable on any income received. You can contribute up to £3,600 gross every year in a pension on behalf of your child. That will cost a basic-rate taxpayer just £2,880 as the government adds tax relief, but the child will not be able to access the money until they are 55.

4. Life Company Regular Savings Plans

These tend to be used by relatively sophisticated investors, particularly expats and international executives. Investors can use them to build up a tax-free lump sum and then assign segments of it to their children. These segments are usually paid out tax-free as long as they fall within a child’s tax-free allowance but, in the meantime, the policyholder retains control of the investment policy. However, minimum investment levels may be higher than some other options.

5. Designated Investment Accounts

These are a good alternative to a Junior ISA, if you wish to retain control of the investment once the child reaches 18.  These are simply held in the parents name(s) and are designated for the child, and until the parents (or grandparents) decide, the investment is held without the knowledge of the child.

6. Child Trust Funds (CTF) 

Although CTFs were stopped in 2010, millions of parents still have active CTF accounts for their children. Parents, family and friends can add a total of up to £3,600 to the account each year. There is no tax to pay on any income or any gains from the fund.  The account remains in the child’s name and they will ultimately have control over how it is spent.

7. Trusts

Legislation over the past few years has eroded many of the tax-planning advantages of trusts. In general, these are now used to control access to the funds rather than for tax planning. Income and capital gains are treated as those of the children, which means that they can use all their allowances each year. It also gets round the problem that children cannot hold shares in their own name.

8. Life Assurance

As a parent the most important thing you do alongside saving and house purchase, is to make sure that none of these are lost due to early death.  Making sure your children have access to the lifestyle and protection your income provides even when you are not here is an act of necessity and love.

9. Make a Will

If you have children under 18, making a will should be compulsory, but unfortunately it is not.  Naming guardians, making plans to ensure your children continue to have the protection you afforded them in life is even more acute on death Over the age of consent, you need to continue to protect them from the tax office and make sure your assets remain in the family.

10. Power of Attorney

After a lifetime of guiding, parenting and loving, you might need to turn to your children for aid in later life. Providing powers to your children makes sure all decisions about money, care and lifestyle remain within the family and people who know your wishes and will act in your best interests.

If you’d like to discuss your options further, Aspen Financial Services can be found at Wickham House, 2 Upper Teddington Road, Hampton Wick KT1 4DY. They can advise on a whole host of financial disciplines, and can be contacted on 020 8943 8121 or at enquiries@aspenfs.co.uk.

 

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