Chapters Financial News

This really is a beautiful time of year. The trees in the Surrey Hills have burst into life and have a renewed freshness about them that heralds the start of summer, time in the great outdoors, and all it has to offer. 

From a financial planning perspective, it also indicates the first quarter of the new tax year with the renewals of tax allowances. It is easy to forget that tax allowances are generally available to all age groups, young and not so young. 

Many parents and indeed grandparents focus on the younger generations as they continue their personal journeys through education, and into work. Thoughts can turn to the evolution of our younger generations, with the spring and the summer being a time of exams, mocks or real, and also of important decisions, such as the next school place or university course, or apprenticeship, and its location. And for many, learning comes with cost, particularly in higher education. Planning ahead can make a real difference in helping to meet future costs, and using tax efficient allowances within the current ISA regime can be worthwhile. It is also a great way to introduce young people to saving money, the way it works, and the longer-term advantages. 

Also, referencing the annual gift allowance of £3,000 per donor from an inheritance tax perspective, this can be useful in funding savings for younger generations and their futures. 

Junior ISA (£9,000 per annum) 

Individual Savings Accounts (ISAs) have been around for just over 26 years now, introduced in April 1999, and replacing the old PEPs (Personal Equity Plans). To help younger generations, Junior ISAs were introduced in November 2011 and replaced the previous option of a Child Trust Fund. More on Child Trust Funds later in this blog. 

The Junior ISA (JISA) applicant must be under 18 (UK resident) and you can invest in stocks and shares, or cash arrangements, to suit your profile and attitude to investment risk. You can have both in a tax year (only one of each), as long as you do not contribute over the limit of £9,000. More detail can be found here: https://www.gov.uk/junior-individual-savings-accounts

Growth on the fund is tax free, and the account is usually managed by a parent / grandparent. The money belongs to the child, and they can control this from age 16 but importantly they cannot access it until age 18, which can be useful to meet further education costs. 

There are many providers available who offer Junior ISA arrangements, and we can help in this regard, dependent on your needs and objectives, or signpost you to a suitable provider. 

Other savings opportunities 

Other points of note for future savings for younger generations are pension accounts for children (up to £3,600 pa gross), with the contribution attracting tax relief at basic rate (20%). Pensions usually need two things, money and time, and with minimum retirement ages rising to age 57 from 2028, there will certainly be time. However, one risk is that contributors such as grandparents and parents may not be around to see the child benefiting. 

Lifetime ISAs (LISAs / from age 18, up to £4,000 pa) can also help towards future property purchase or retirement in a tax efficient way, although some of the limits applicable for the property purchase price, particularly in London and the southeast, are starting to attract questions. More on the LISA option can be found here: https://www.gov.uk/lifetime-isa

One final note, and perhaps for those slightly older, if you were allocated a Child Trust Fund (noted above) between the years of 2002 and 2011, don’t forget to keep an eye on the account or, where relevant, claim its value. Many remain unclaimed and forgotten about. You cannot have a Junior ISA and a Child Trust Fund at the same time but could transfer the Child Trust Fund into a Junior ISA if you wanted to open one. 

Summary 

However you help with the plans for your children and grandchildren, some early financial planning can make a real difference, and using tax allowances is as important for them as it is for you. Even if planning comes later than preferred, and this might be dictated by the availability of funds, sheltering returns for tax is usually worthwhile. 

No individual advice is provided in the content of this blog. 
Keith Churchouse FPFS 
Director 
CFP Chartered FCSI
Chartered Financial Planner 

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899