Investing for grandchildren can take a number of forms and can be either structured where the investments are specifically designated for the grandchildren or informal arrangements whereby investments already in place are potentially earmarked as gifts for grandchildren at a later date.
Examples of investments for grandchildren include:-
- Junior ISAs
- Bank, building society and Post Office deposit accounts
- National Savings & Investment products such as Children’s Bonds and Savings Certificates
- Unit Trusts
- Investment Trusts
- Child Trust Funds
- Regular savings accounts
One of the benefits of children’s investments which are funded by contributions from grandparents is that any interest is assessed on the child who is then able to utilise their personal allowance and have the interest paid without deduction of income tax.
Interest in excess of £100 per annum earned by children from investments funded by a parent are assessed for income tax purposes as being the parent’s income and, therefore, subject to income tax.
When considering investing for your grandchildren, you should take into account:-
- Whether you wish to make a one-off investment or have a regular monthly commitment.
- At what age you would like your grandchildren to have the capital.
- What is your objective for the capital – school or university fees or a deposit for a first home.
- Do you want your grandchildren to have control over the investment or maybe a trust arrangement would be preferred.
- The level of investment risk that you are willing to take.
There are, of course, other factors that need to be considered and if you are looking to invest either in some form of asset backed investment, such as a unit trust or investment trust, or feel that a trust arrangement would be suitable, you should consult an suitably qualified and impartial adviser who will be able to help you in establishing the most suitable investment scheme for you and your grandchildren.