Children’s Savings March 2014

Children’s savings accounts are much the same as adult ones and are offered by banks and building societies.  You can open a savings account with just £1 for any child aged up to age 18. Children over seven can usually operate their savings account themselves, this depends on the account, and allows them to pay money in and withdraw funds. Usually the bank or building society will deduct tax on the interest from a child’s savings account, but most children don’t have enough income to pay tax. To stop tax being deducted a parent or guardian would need to complete aform R85 for each account. You can also get these from your bank or building society or from HRMC (click here for the form). Children born between 1 September 2002 and 2 January 2011 qualified for the government’s Child Trust Fund. Child Trust Funds have now been replaced by Junior ISAs (see below) Parents saving for a child You can give a child any amount of money, or invest it for them, but if you’re a parent or step-parent the following rules apply: If you have given your child money and it earns over £100 a year in interest, dividends, rent or any other investment income, the interest will be taxed as if it were yours. This does not apply to Junior ISAs, Child Trust Funds and Children’s Bonds. This doesn’t apply to anyone else a grandparents and friends can give as much as they like and it will not impact on the tax situation of the interest. Junior ISAs Junior ISAs were launched in November 2011, they allow you to save and invest on behalf of a child under 18. With no tax on the earnings, the money you put away can grow even faster. You can open a Junior ISA for your child if they:

• were born on or after 3 January 2011
• were born before September 2002 and are still under 18, or
• were born between 1 September 2002 and 3 January 2011, but didn’t qualify for a Child Trust Fund account

If your child already has a Child Trust Fund account, you can’t open a Junior ISA for them, From April 2015 you will be allowed to transfer a Child Trust Fund to a Junior ISA. Your child can have a Junior Cash ISA, a Junior Stocks and shares ISA or both. If you have both, the most you can save per year is still £3,720. We have provided information only on the Cash ISA version, if are considering a Stocks and Shares ISA then contact Gaeia for advice. All the below accounts have a minimum opening balance of £1. Triodos Bank is one of the world's leading sustainable banks, with a mission to make money work for positive social, environmental and cultural change. They are the only Ethical Bank/Building Society currently offering a Junior Cash ISA.

  Click here to read more Mutual organisations Within Mutual organisations such as building societies, customers are "members" with a democratic right to have a say in the management and policy. We consider them to be “ethically neutral” as although most are not proactively involved in the advancement of social and environmental factors, they are less likely than the big banks to be involved in business practices that conflict strongly with your values.

  NS&I Children's Bonds A parent, guardian or (great) grandparent can buy the bonds but they are owned by the child. The parent or guardian holds them until the child turns 16. Bonds are sold in issues, each with a fixed rate of interest and run for 5 years.  You can roll over the issue into a new five-year issue until the child’s 16th birthday.  You can start investing with just £25 up to a top limit of £3,000 per issue. All the interest is tax-free, the above parental tax rules do not apply.

  Friendly Society tax-exempt plan Like the Junior Stocks & Shares ISAs these are longer term investments. They are only available through Friendly Societies, which are owned by their members to work for the advantage of those members. You are able to choose a term between 10 and 25 years. Money is invested in a share-based investment fund for the term length you choose. The maximum amount that can be paid in is £270 a year, or £300 a year if you pay in £25 each month. On the maturity date, the child must be at least 16 and you must have paid into the plan for a minimum of ten years. If you would like to know more about these investments please contact Gaeia. Other Long Term savings options Gaeia can provide advice on many other options for lump sums or regular savings, often using trusts to save for children and grandchildren. Contact your Gaeia adviser for more information. Interest rates are correct as at 05/03/2014. Please check providers for most up to date information and terms and conditions of each account. The research is obtained from provider websites and Money Facts. Glossary p.a.: per annum BS: Building Society

HSChfact/05.03.14