Investing for your child’s future – Decided it’s time to start saving for your little one? Putting money aside for your child is a great way to prepare them for their future, and can also teach them valuable lessons about their managing their finances.

Whatever hopes and dreams you have for your children or grandchildren, it’s reassuring to know that you can help make this happen by setting them on the path to financial security when they are young. To fund the future you want for them, it’s crucial to start saving early.


Building wealth for your children or grandchildren
Junior Individual Saving Account (JISA)

Junior ISAs share the same set of rules as adult ISAs, though with a lower annual limit on contributions, currently £9,000 (2020/21 tax year).

This means they’re a tax-efficient way to save in your child’s name. The money cannot be withdrawn before the child’s 18th birthday, so cannot be used for certain expenses, such as school fees. The child will take control of the money, and can make their own investment choices, from the age of 16. For more information visit

Bare trusts

As with a Junior ISA, a child can withdraw money from a bare trust in their name once they turn 18. However, withdrawals can also be made for the benefit of the child before this age. So, it can be used for school fees, for example.

A second difference is that there is no limit on how much can be paid in. While it is not protected from tax (as a Junior ISA is), it will be taxed as if it belongs to the child, so will often fall within their personal allowances.

Discretionary trusts

Discretionary trusts offer more control and flexibility to the trustee. It is possible to establish one in the name of a group of beneficiaries (named or unnamed), for example, all your grandchildren. The trustee retains control over the money and investment choices and sets the payment terms.

However, the tax treatment is more complex than for bare trusts, usually resulting in higher taxes and more administration.

Junior Self-Invested Personal Pension (SIPP)

Junior SIPPs operate according to the same rules as other pensions, except that they have a lower £3,600 annual limit on contributions (2020/21 tax year).

This means that, like other pensions, tax relief is added to contributions, and no tax is paid on income and capital gains. It also means that, currently, withdrawals are not possible until the child reaches age 55. So, while they offer very little flexibility, there is potential for even small investments to grow significantly.

To discuss ways in which you can invest for your child or gandchild’s future please contact us.

Trusts are a highly complex area of financial planning. The financial conduct authority does not regulate trust advice.
Tax laws are subject to change and taxation will vary depending on individual circumstances.
The value of investments and income from them may go down. You may not get back the original amount invested.
Past performance is not a reliable indicator of future performance.

Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.

The Financial Conduct Authority (FCA) does not regulate tax advice, estate planning, trusts or will writing.

The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice.

Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.

Pareto Financial Planning Limited is authorised and regulated by the Financial Conduct Authority (FCA).