Child Savins Fund

[Sockpuppet]

Some good friends of mine are having a child.

I'm thinking about setting up a fund for thier kid. Anyone have any experiance of this kind of thing. Can I open it in the kids name or do they have to do it (be nice if it was a suprise)?

What the best way to do this from a tax pov?

I was thinking of a £1k lump sum + £500 a year till the kids 18.

[KevinS]

The best deals are normally the CTF (Child Trust Fund) accounts that parents use for the dosh the gov hands over at birth and again at 17(?).. They have no access to the money until they are 18, I believe and because they are such long term deals, you can get a reasonable interest rate.. So, after the kid is born and the parents have set up the account, get the details and make deposits as you want..

[moorfield]

I was thinking of a £1k lump sum + £500 a year till the kids 18.

Been plenty of discussion re CTFs on here before.

Fine plan - but what do you think an 18yr old is realistically going to do with all that cash? Pi$$ it against the wall or spend responsibly? What would you have done?

Missus M and I thought long and hard about this one and instead opted to put a years worth of pension contribution aside for each of the offspring (£2808 - grossed up to £3600 after tax relief).

[oracleslave]

Some good friends of mine are having a child.

I'm thinking about setting up a fund for thier kid. Anyone have any experiance of this kind of thing. Can I open it in the kids name or do they have to do it (be nice if it was a suprise)?

What the best way to do this from a tax pov?

I was thinking of a £1k lump sum + £500 a year till the kids 18.

I think if you go with a traditional child trust fund then they would need to open it. You would be allowed to contribute to it though. There are quite stringent limits on the maximum you can contribute, I think it's £1200 a year or something.

From a tax perspective the traditional child trust fund is probably best in that the kid can get the money out tax free.

However if you have some savy and know what you are doing I don't see why you couldn't invest the money independently of the traditional child trust fund and it might perform far better.

[Lewis]

My son has the following:

(1) Child bank account with HSBC. Interest is paid GROSS and at a very good rate. However they are only allowed to earn £100 or so interest p/yr before you need to declare their interest on YOUR tax return for you to pay tax on! I control money until he is 16 or 18 (can't remember). Family pay into this for birthdays etc..

(2) One of my savings accounts which is linked to my off set mortgage. I save on mortgage interest which I pay him. This means effectively it is the same as above but with no need to declare on tax return. Downside is account is not in his name. I always control money. We pay all our child benefit money into this account for him when he is older.

(3) Child trust fund thingy where we put the £250 or whatever it was from the government. Money invested in shares and locked away until he is 18. We have only put in the government money but anyone can pay into it.

(4) Pension. You can pay up to £3600 per year into a stakeholder pension and get full tax relief. So government gives you 22% for FREE! All the usual downsides of a pension but paying for just 1 year gives a nice chunk come retirement at 65. In the event of his death it goes to his next of kin. We have paid for just one year and that is it.

[Spoiler]

Have a look at bare trusts. I think you open them in your name, but with the childs initials also on the account name. You are not liable for tax on these iirc, it counts towards the kids tax liabilities. Not sure if these limit you to what you can invest in though (i.e. shares, not cash).

This explains a few different options (bare trusts are under the 'Tax Issues' link.

[Likely]

KIDS = MONEY , I'll steer clear...

[Sockpuppet]

Cheers for the responses guys.


I'm not really too fussed if it pisses it up the wall - the money is for "it" to do what it wants with.