Children and Savings

Do you know the best savings options for children? 

Up to £9,000 a year can be invested in a Junior ISA, for the tax year 20-21, for a child under 18. Capital gains and income are tax free. The allowance can be split between cash, and stocks and shares.  They can only be opened by the child’s parents or guardians, but anyone can contribute to a Junior ISA account.  The money can’t be withdrawn until age 18, unless the child is terminally ill.  After this point the Junior ISA will become a full ISA and the adult limit of £20,000 will apply. 

• Junior self-invested personal pensions (Sipps): Anyone can contribute £3,600 to a pension per year, even if they have no earnings. This money gets the usual 20p% tax relief, meaning up to £2,880 can be contributed; the tax relief comes in at £720.  Savings are tied up until the child reaches 55 (under current legislation). So it may be better to invest in a Junior ISA first then put any further savings in the pension.

• Your own ISA: If you aren’t using your full ISA allowance each year, you can invest in it for your children. The limit for this tax year is £20,000. Investing the money through your own ISA gives parents control over the money even when the child reaches 18.  

As each person’s financial situation is unique, it might be worth considering speaking to an Independent Financial Adviser to find out what is best for you.