DIY Investor Magazine
/
December 2015
24
DESIGNATED (NAMED) ACCOUNTS
Most brokers will allow one or more Dealing or General
Investment Accounts to be set up by a parent with a
designation for a child – Dwayne Pipe a/c 1234
(Jose Pipe) – for example.
The account holder retains total control of the account,
makes contributions and all investment decisions and
decides when to pass the assets to the designated
account holder.
However, this also means the account holder retains
the tax liability - Income and Capital Gains - as well as
potentially Inheritance Tax as the assets remain part of
the account holder’s estate.
Such an arrangement may appeal on the basis that it is
totally flexible, with assets available at any time should
circumstances dictate and the notion of a segregated
‘pot’ with a potentially separate time horizon may
allow the account holder to employ a slightly different
investment strategy.
JUNIOR ISA
Junior ISAs are investment accounts for children that
protect money from Income and Capital Gains Tax in
the same way as their grown up cousins the ISA and
now the ‘New’ ISA (NISA).
EVEN A MODEST REGULAR SAVINGS AND INVESTMENT
PLAN COULD DO TO HELP YOUR CHILDREN BECOME
PART OF ‘GENERATION FOUND’
Children born between September 2002 and January
2011 had a Child Trust Fund (CTF) opened for them
by the Government with a £250 ‘gift’ to encourage the
savings habit.
When CTFs were disbanded many found themselves
trapped in accounts that the providers had lost
interest in, paying dismal returns and attracting high
fees. However, since April 2015 parents have been
able to transfer these funds into a Junior ISA with its
greater choice and flexibility. A Junior ISA is opened
by a parent or guardian, but grandparents, other
family members and friends are then able to make
contributions up to an annual limit, which in 2015/16 is
£4,080.
The parent or individual responsible for the account
controls contributions and investment decisions but the
account is held in the name of the child and all assets
are ring-fenced until the eighteenth birthday whereupon
the account becomes a NISA operated in their name,
affording them full and unfettered access.
Like a normal ISA, there is a cash and stocks and
shares option for the Junior version, but remember, you
are not investing for yourself but for your child, who will
be the only one able to access the money when they
reach the age of 18 except in cases of death or terminal
illness.
Junior ISAs are a long term investment vehicle and it is
very important that you select a provider that offers you
the pricing structure and investment choice appropriate
to your requirements. In addition to a Junior ISA a
diligent saver aged between 16 and 18 can invest up to
£15,240 per annum into a Junior Cash ISA.
