Investing for children and grandchildren
Give them a financial head start
Investing for your child or grandchild, gifting with “warm hands”, is one of the most meaningful gifts you can give. Not only does it help them achieve their future goals—like paying for university, buying their first car, or putting down a deposit on their first home—it also starts educating them about money and financial planning.
Many parents and grandparents choose to invest by setting aside a small monthly amount, while others prefer to make a lump sum contribution. If the child is young, investing can be far more effective than saving in cash, as investments generally grow over time and give your money greater potential to build their future wealth.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested. Equities do not provide the security of capital which is characteristic of a deposit with a bank or building society.
Which account should I invest in for a child or grandchild?
Junior Stocks & Shares ISA
A Junior Individual Savings Account (JISA) is a popular way to invest for children. It must be opened by a parent or guardian, but once open, anyone—parents, grandparents, friends—can contribute.
Tax-efficient growth: No income or capital gains tax to pay
Annual limit: Up to £9,000 can be invested per child per tax year into a Junior ISA
Access: Managed by the parent or guardian until the child turns 18, when it becomes fully theirs
Junior ISAs are a popular way to save for your child’s house deposit or towards university fees. When the child reaches the age of 18 then they will have full control over the Junior ISA and investments inside of it.
Junior Pension
A Junior Pension is a pension for a child. It may seem odd to start saving for your child’s retirement when they are so young but, given the long-time frame the investments have to grow, to hopefully grow, means that investing small amounts could leave your child with substantial pension savings by the time they retire.
It must be opened by a parent or legal guardian, but once opened anyone can contribute.
Tax relief: Contributions receive 20% tax relief automatically. So to invest £100, you only pay £80, and the government tops up the rest
Annual limit: £3,600 gross per tax year, where the grandchild has no relevant UK earnings. Therefore, to allow for the tax relief, £2,880 net would be invested and grossed up.
Access: Funds can’t be withdrawn until retirement age (currently 55, rising to 57 from 2028).
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
Set up a Trust
Some parents and grandparents are reluctant to use Junior ISAs as they do not want the child to access the money when they are 18. In these circumstances, setting up a Discretionary Trust for a child might be a better option.
A Trust is a legal agreement where the person gifting the money (known as a Settlor) places assets into a trust. The assets in the Trust are then managed by the Trustees on behalf of the nominated beneficiaries.
Discretionary Trusts are flexible and gives the trustees the right to decide when the assets can be accessed by the beneficiaries.
For example, grandparents might wish to gift money to their grandchildren. The grandparents are Settlors and Trustees, and their adult children are Trustees alongside them – the grandparents and parents thereby manage the Trust assets on behalf of the grandchildren/children, who are the eventual beneficiaries.
Trusts are complex and it is important to seek advice. We provide all the paperwork for the Trusts we can offer at no additional charge.
Unit Trust
It is also possible to invest into a Unit Trust when you are investing for the medium to long term. These can also be held in Trust for a child.
Trusts are not regulated by the Financial Conduct Authority.
Give them a head start today
Whether you’re a parent or a grandparent, investing for your child or grandchild is a great way to help give them a head start in life.
There are many options available to you, book a no-obligation meeting today to understand your options and get started.
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