How to invest wisely for your grandchildren

Investing for your grandchildren is a wonderful gift for their future. Giving them a healthy financial start to their adulthood might help them fund further education, get a foot on the property ladder, or explore the world without worrying about covering the costs of halfway decent hostels.

Along with a sense of financial independence, making investments for children early in life is a great way to help them learn important lessons about money. As your grandchildren get older, you can involve them in conversations and decisions about where and how their money is invested.

Read on to discover the benefits of investing for your grandchildren and how you can do this.

Invest while your grandchildren are young and reap the rewards of compound interest

Compound interest on investments means the earlier you invest the better.

The biggest advantage when investing for your grandchildren is that the money you put away is likely to be invested for several years. This means you can invest with a long-term approach and enjoy the potential benefits that brings.

Whatever the money will be used for, take full advantage of those first 18 years of compound interest and you’ll be in a powerful position to generate wealth, which could make a real difference to their potential life choices in early adulthood.

What should I consider when investing for a child?

There are a few factors to think about before you choose where to invest your money:

  • Timescale – how long before you or they will need to access the funds?
  • Risk – how much risk are you prepared to take with the aim of better returns?
  • Tax – do you want to ensure a tax-efficient investment plan?
  • Charges – what associated costs are involved when setting up, managing, and accessing the investment?

We can help you understand the choices available and explain the tax situation and any ongoing costs associated with investments for grandchildren. We can also help establish access arrangements and mitigate any Inheritance Tax implications.

Invest tax-free using a Junior ISA

While parents or guardians must open a Junior ISA (JISA), the money belongs to the child. Your grandchild can access the money when they turn 18.

A Stocks and Shares JISA is a useful long-term investment vehicle. Any money put into a JISA is free of tax and you can invest up to £9,000 (2021/22) each year.

Saving just £500 a year into a Stocks and Shares JISA can really add up. If you put £500 into a JISA a few months after your grandchild is born, and again before every birthday, by the time your grandchild reaches their 18th birthday the investment could be worth almost £14,350 (assuming 5% investment growth each year, less 1% annual charges).

Investing in a JISA guarantees the money definitely goes to your grandchild, since it’s only the child who may access the money when they turn 18. If they don’t want to take the money out of the ISA at this stage, the account will transfer to an adult ISA, allowing them to keep the funds invested.

There are various JISA products available. With a wide range of investment sectors to choose from, it’s wise to talk to a financial planner to make sure you’re making a sound decision on behalf of your grandchild. Get in touch if you’d like to discuss the options.

Start contributing to a pension

An alternative to a JISA is to save into a pension. This may seem absurd when your grandchild is possibly still in nappies, but it’s an interesting proposition.

A parent or guardian can open a pension for a child. Once set up, any family member can invest.

Free from Income Tax and Capital Gains Tax, you can invest £2,880 tax-efficiently each year. The government automatically tops up contributions by 20%, so an annual payment of £2,880 automatically becomes £3,600.

As an example, if you invested the maximum of £8,640 (£10,800 including the government contribution) over just three years, the pension could be worth £350,943 in 50 years’ time, with 25% available as a tax-free lump sum when they reach pension age, under current legislation. (Example assumes an average growth rate of 2.5%, with no early withdrawals.)

Any growth is free of tax which helps it to increase in value. Like any investment, its value can go down as well as up.

If you want to invest for your grandchildren and you’re not sure what’s the best option, or what type of fund you should use, we can help.

Please email us at hello@bluewealth.co.uk or give us a call on 0117 3320230 to discuss your wishes and how we can help you give a financial gift to your grandchildren.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Levels and bases of, and relief from, taxation are subject to change.

PRIVACY NOTICE

Blue Financial Group Ltd (referred to as ‘we’ or ‘us’) takes the privacy and security of your personal information seriously. This policy sets out the basis on which any personal data we collect from you or you provide to us, will be processed. Please ensure you understand our policy and practices in relation to holding your personal data and how we process it.
By visiting our website or engaging with us, you consent to the practices laid out in this policy.

DISCLOSURE OF YOUR INFORMATION

We may share personal data we hold about you with other parties. however, this will only be with companies who we work with on your behalf and for a legitimate purpose, which is necessary to ensure that we remain compliant with our legal and regulatory responsibilities. Steps will be taken to ensure that the information is accurate, kept up to date and not kept for longer than is necessary.
We will ensure your data is safeguarded against unauthorised or unlawful processing. The information you provide is subject to the Data Protection Act 1998 (the ‘Act’). By signing our Service Charter, you consent to us or any company associated with us processing your personal data. We will not share or sell personal information about you with third parties except to provide the information, products or services you have requested.
Under the Data Protection Act and General Data Protection Regulation individuals have a Right to Erasure (‘right to be forgotten’) which can be applied to personal data, in specific circumstances, and is a right that you may be able to exercise for the data that we hold for you. However, we can refuse to comply with a request for erasure where the personal data is being processed to comply with a legal obligation. Under FCA regulation we have a mandatory requirement to retain your data for specified periods (and for some products, such as occupational pension transfers, we are required to retain this data indefinitely) which may impact your Right to Erasure.
If at any time you wish us, or any company associated with us to cease processing your personal data or sensitive personal data, or contacting you for marketing purposes, please contact The Data Protection Officer on (01403 334455) or in writing at Best Practice IFA Group Ltd, Broadlands Business Campus, Langhurstwood Road, Horsham, West Sussex, RH12 4QP. Subject to certain exceptions, you are entitled to have access to your personal and sensitive personal data held by us.

SAFEGUARDING DATA

We are required to follow procedures with regards to maintaining the confidentiality of your personal information. We will continually review these procedures to ensure your information remains safeguarded and will make changes as we deem it appropriate to do so.
However, when sharing information via the Internet, due to its open nature, we cannot guarantee the security of such information that you transmit via our website.

INFORMATION WE MAY COLLECT FROM YOU

We may collect and process the following data about you:
• Information you provide – You may give us information about you by completing our contact form on our Website or by engaging with us via phone, email or in writing. The information would likely include your name, address, email address and any other contact information. It will also include other detailed financial and personal information about you if you engage with our services.
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o Technical information including your IP address, browser type and version, pages visited, geographic location and your device information.

HOW WE MAKE USE OF THE INFORMATION

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STORING YOUR PERSONAL DATA

We take appropriate measures to ensure that any personal data are kept secure, including security measures to prevent personal data from being accidentally lost, or used or accessed in an unauthorised way. We limit access to your personal data to those who have a genuine business need to know it. Those processing your information will do so only in an authorised manner and are subject to a duty of confidentiality.
We also have procedures in place to deal with any suspected data security breach. We will notify you and any applicable regulator of a suspected data security breach where we are legally required to do so.
Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to the Website; any transmission is at your own risk. Once we have received your information, we will use strict procedures and security features to try to prevent unauthorised access.
Keeping your personal data up to date
If your personal details change you may update them by accessing this data through the wealth platform portal, or by contacting us using the contact details below. If you have any questions about how we use data collected which relates to you, please contact us via phone or email.
We will endeavour to update your personal data within seven working days of any new or updated personal data being provided to us, in order to ensure that the personal data We hold about you is as accurate and up to date as possible.
How long we keep your personal data
• We will hold personal data (e.g. name, address, date of birth and contact details) in line with our regulatory and legal obligations as set out by our regulator – currently a minimum of 5 years for investment business and indefinitely for occupational pension transfer or opt-out business.
Where we store your personal data
All of the information that we hold about you is stored on secure servers that comply with the GDPR requirements. They also comply with the most widely accepted standards and regulations like ISO27001, 27017, 27018 and SOC 1, 2 and 3.
If you would like further information please contact us or the Compliance Director at Best Practice IFA Group Limited, of which we are an Appointed Representative (see ‘Contact’ below).

WHERE WE STORE YOUR PERSONAL DATA

All of the information that We hold about you is stored on our secure servers within the EEA.

The data that We collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). By submitting your personal data, you agree to this transfer, storing or processing. We will take all steps reasonably necessary to ensure that your data is held securely and in accordance with this Policy. Countries outside the EEA do not have the same data protection laws as the United Kingdom and EEA and We have therefore ensured that any of our suppliers who may transfer your personal data outside the EEA has put in place appropriate measures to protect your data, either by being a member of the US-EU Privacy Shield, or by entering into a European Commission approved contract (as permitted under Article 46(5) of the General Data Protection Regulation).

If you would like further information, please contact Us or the Compliance Director at Best Practice (see ‘Contact’ below). We will not otherwise transfer your personal data outside of the United Kingdom or EEA or to any organisation (or subordinate bodies) governed by public international law or which is set up under any agreement between two or more countries.

YOUR RIGHTS

Under the General Data Protection Regulation you have a number of important rights free of charge. In summary, those include rights to:
• Access to your personal data and to certain other supplementary information that this policy is already designed to address
• Require us to correct any mistakes in your information which we hold
• Require the erasure of personal data concerning you in certain situations
• Receive the personal data concerning you which you have provided to us, in a structured, commonly used and machine-readable format and have the right to transmit those data to a third party in certain situations
• Object at any time to processing of personal data concerning you for direct marketing
• Object to decisions being taken by automated means which produce legal effects concerning you or similarly significantly affect you
• Object in certain other situations to our continued processing of your personal data
• Otherwise restrict our processing of your personal data in certain circumstances
• Claim compensation for damages caused by our breach of any data protection laws.
For further information on each of those rights, including the circumstances in which they apply, see the Guidance from the UK Information Commissioner’s Office (ICO) on individuals rights under the General Data Protection Regulation

HOW TO COMPLAIN

We have that we or our Compliance Director can resolve any query or concern you raise about our use of your information. The General Data Protection Regulation also gives you right to lodge a complaint with a supervisory authority, in particular the European Union (or European Economic Area) state where you work, normally live or where any alleged infringement of data protection laws occurred. The supervisory authority in the UK is the Information Commissioner who may be contacted at https://ico.org.uk/concerns/ or telephone 0303 1231113.

COOKIE POLICY

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TYPES OF COOKIES USED

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We use all or some of the following categories of cookies on our website:

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CONTACT

All questions, comments and requests regarding this Privacy and Cookies Policy should be addressed to Robert Bowers rob.bowers@bluewealth.co.uk or write to us at 3 Westbury Mews, Westbury-on-Trym, Bristol, BS9 3QA. Alternatively, please contact our Compliance Director at Best Practice IFA Group Ltd, Broadlands Business Campus, Langhurstwood Road, Horsham, West Sussex, RH12 4QP. Tel 01403 334455 or via email at info@bestpractice.co.uk