Grandparents are often keen to contribute to grandchildren's savings as a way of rolling wealth down the generations and saving tax.
Cash may seem like the safest option with guaranteed returns but there is a risk that interest will not keep up with inflation. A child will not lose money, but they may be able to buy less with the fund in future than they could today.
Stock market investments have historically outperformed cash over the long term but are riskier – they will fall as well as rise in value and a child could get back less than invested. Past performance should not be seen as a guide to how investments might perform in future.
Most accounts for children must be opened by a parent or legal guardian, but there are exceptions. We offer three junior accounts that grandparents can pay into, one of which they can also manage on a child’s behalf.
When money or assets are paid into an account for someone else's benefit (such as a child’s), this is treated as a gift. Some gifts are (or may become) free or exempt from inheritance tax, others may be subject to it. Remember tax rules can change over time, and the value of benefits will depend on the child's circumstances.
Find out more about minimising tax
Accounts must be opened by a parent or guardian. Parents can open a Junior ISA without subscribing any cash if the funds are coming later (within 30 days) from a third party such as a grandparent. Alternatively parents can complete a paper application form to open a Junior ISA accompanied with a cheque from a grandparent.
Once a parent or guardian opens a Junior ISA, friends or family can make contributions up to the annual limit. Junior ISA top ups can be made online, by post or by telephone as a lump sum or via monthly savings.
Accounts must be opened by a parent or guardian. If the child is over 16 they will need to sign the Junior SIPP application, otherwise it will need to be signed by the child's legal guardian. In both cases the legal guardian form will also need to be completed.
After the Junior SIPP has been opened grandparents can make lump sum contributions by cheque or by telephone.
The account will be set up as a bare trust. Grandparents can easily open a Junior Investment Account and set up a bare trust by completing the application and Election for Bare Trust forms. They (or anyone else) can choose to make a lump sum payment, and also set up a direct debit for regular monthly payments into the account.