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They
may not thank you this Christmas but if you are considering
investing for your children or grandchildren at this
festive time, here are some options you could consider.
You need to take into account various factors such
as your risk profile, the size of the investment and
at what age the child will benefit from the investment.
Stakeholder
pension
A contribution to a stakeholder pension will
qualify for basic rate tax relief, which means that
every £10 paid into the scheme will cost only £7.80.
A parent can take out a stakeholder pension in a child's
name from birth and contribute up to £2,808 a year
into the plan. The Inland Revenue will add 22% basic
tax relief, bringing the total invested annually up
to a maximum of £3,600.
Although
the fund cannot be accessed until the age of 50 at
the earliest and must then be largely used to buy
a pension, very few people make adequate provision
for their retirement, so it could be a welcome boost
to your child's retirement pot.
Cash
Mini ISA
Another investment idea is a cash mini ISA.
These are available to children aged 17 and 18 and
up to £3,000 a year can be sheltered in a tax-efficient
savings account. However, remember that the value
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 fund and should
be considered as a medium- to long-term investment,
with a minimum investment period of five years. Unit
trusts vary in risk profile from extremely cautious
to highly speculative. Over the medium to long term,
they have outperformed interest rates paid on deposit
accounts.
Friendly
Societies Another
investment choice is a Friendly Society ten-year tax-exempt
regular savings plan. After ten years, returns are
free of tax. Children's plans are written to age 18
or 21 and the savings plans also provide life insurance.
The maximum monthly premium for each individual is
£25.00.
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