I would like to know who can invest on behalf of a child. My brother and I have approximately £15,000 to invest for my grandson (his great nephew).
We wish to invest the full amount now, then transfer the maximum allowed annually into a self-invested personal pension (Sipp). Who can open and manage appropriate accounts – can we do it or does it have to be his parents?
How you invest the money will depend on what type of account you wish to open. There are many things to consider including any future access the child will have to their money, tax considerations and your investment strategy.
In your situation, you also have to be aware of any restrictions to contribution levels. A Junior individual savings account (Jisa) is an option, but while you can contribute this type of Isa can only be opened by somebody with parental responsibility for the child. It is only this person, known as the registered contact, who is able to give investment instructions and who will receive all the documentation. Also, there are limits on how much you can deposit in a Junior Isa – it is £4,080 in the 2016/17 tax year.
You are able to set up a pension on behalf of a grandchild. This can be a stakeholder pension, personal pension or a Sipp.
You can also set up and put money into investment funds on behalf of a grandchild. There is no limit to the amount you can invest. You can establish this in different ways. For example, you can set up a bare trust [in which your grandchild would have the right to the capital and assets within the trust once he/she reached the age of 18] or set up a designated account without an actual trust being used. The right decision will depend upon the flexibility you need and tax considerations.
You can also set up a savings account for a grandchild providing you have the right documents, such as the child’s birth certificate. Again there is no limit in terms of how much you can save.