| Stakeholder
pension
A contribution to a stakeholder pension will qualify for basic rate
tax relief. You can take out a stakeholder pension in a child's name
from birth and contribute up to £2,808 net a year into the plan.
The Inland Revenue will add basic rate tax which will bring the total
invested annually up to a maximum of £3,600.
Cash Mini ISA
Up to £3,000 a year can be sheltered in this tax-efficient
savings account, which is available to children aged 16 and 17. However,
remember that the spending power of cash held in deposit accounts can
be eroded when interest rates are cut.
National Savings
These are regarded as low-risk investments and opening an account is
a simple procedure. The downside to this type of investment is that,
with interest rates currently so low, the rate of interest paid on some
investments may be less than the rate of inflation.
Unit trusts
A unit trust is a collective investment fund and should be considered
as a medium- to long-term investment of five years and beyond. Unit
trusts vary in risk profile from extremely cautious to highly speculative.
Over the medium to long term, they have provided a better return than
money held on deposit.
Friendly Societies Another
investment choice is a Friendly Society ten-year tax-exempt regular
savings plan. After ten years, returns are free of tax. The savings
plans also provide life insurance cover. The maximum monthly premium
for each individual is £25 or £270 per annum.
Article
date January 2004
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