Saving for Children

In view of the historic better performance of equities over cash and bonds in the longer term, it is perhaps surprising how many people save for their children in cash savings accounts. Parents may also be surprised to find out that they may be taxed on any income over £100 p.a. on children's savings funded by them. 

There are several opportunities for tax-efficient saving plans for children. However, it is not as simple as merely following products which purport to be specifically for children. Frequently the tax treatment and/or charging structure of such a product is unfavourable. The solution differs from person to person according to circumstances, so it is important to get independent advice.

Pensions for Children

As an interesting alternative, did you know that a minor may have a stakeholder pension, and receive tax relief at the basic rate on the contributions? For every £80 contributed, government will contribute £20. The projections are attractive, but of course the term means that benefits cannot be taken before age 55. This has proved popular, particularly with grandparents concerned about their grandchildren's pension prospects.  

The area of financial planning for children can be complex, requires tax knowledge and may involve the use of trusts. Please call us for an initial discussion.