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Saving for the next generation

Taking proactive steps in securing your child’s or grandchild’s financial future

Many parents and grandparents set aside money for the next generation to help with their financial needs. The rising cost of education, housing, and life in general, has created concerns about financial stability for future generations.

Increasingly, parents and grandparents want to ensure their children and grandchildren have the financial resources to navigate these challenges successfully. Additionally, a greater awareness of the importance of financial planning and wealth accumulation has prompted many individuals to take proactive steps in securing their children’s financial futures.

Investing strategically

Starting early and investing strategically will enable you to provide a solid foundation for your child’s or grandchild’s economic wellbeing. The desire to give the next generation a head start in life and empower them to overcome any financial hurdles is a driving force behind why many parents and grandparents focus on setting aside money for children and grandchildren.

When considering the tax implications and how to arrange your affairs best, tax-efficient structures like Junior ISAs (JISAs) or bare trusts can be worth exploring.

Passing assets to young people

A bare trust is commonly used to pass assets to young people. In a bare trust, the assets are held in the name of the trustee (typically a parent or grandparent) until the beneficiary reaches a specific age, in this case 18.

On the other hand, a JISA has a current annual allowance of £9,000 (tax year 2023/24) and anyone can contribute to it. There is no limit to the amount that can be settled in a bare trust, while there are restrictions on JISAs, and a change of beneficiary is not allowed.

Exempt from Income or Capital Gains Tax

Assets held in a JISA are exempt from Income or Capital Gains Tax, providing a significant tax advantage. However, taxes still apply to assets held in bare trusts. If the funds in a bare trust come from the parents, and the return is £100 per annum or more, the Income Tax will be applied to the parent.

If a grandparent contributes, the assets are taxed as belonging to the grandchild, usually resulting in a lower tax burden. Contributions to bare trusts and JISAs are potentially exempt transfers for Inheritance Tax purposes if the donor survives for seven years from the date of the gift.

Paying for school fees

Regarding access to the funds, money can be withdrawn from a bare trust while the beneficiary is still a minor, as long as it is used for their benefit, such as for school fees. Conversely, funds cannot be withdrawn from a JISA until the beneficiary reaches the age of 18, but they can assume control of the account from the age of 16.

One common concern with JISAs and bare trusts is what happens when the child turns 18 and gains asset access. At this point, they have control over the funds, and there may be little that can be done if the money is misused.

Setting aside a portion of savings

Trustees of bare trusts have a duty to inform the beneficiary about the trust’s existence when they turn 18, and income from the trust should be reported on the beneficiary’s tax return, making it difficult to ignore the trust’s existence.

It’s worth considering alternatives to JISAs and bare trusts, such as setting aside a portion of your savings for your children or grandchildren. More complex trust and inheritance arrangements are also available, and you should always obtain professional advice.

Ready to build your child’s or grandchild’s financial future with smart advice?

Investing early for your children or grandchildren can give them a significant financial headstart. As the costs of private education, university, getting on the property ladder and weddings continue to grow, to find out more about investing for your children or grandchildren, please speak to us.



Adam Reeves

Author: Adam Reeves

Independent Financial Planner, Wealth Manager, Director

Last updated on

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Adam was quick to assess & understand my situation, and was able to discuss & communicate in a very concise and simple way the various options available to me, taking time for me to understand and clarify where necessary. My understanding & knowledge of taxation & pensions has increased significantly allowing me to feel much happier making financial decisions for the future.

Rob – West Sussex

Adam and his team undertook in-depth research into our existing QROPS schemes and clearly set out both pros and cons of transferring the funds back to the UK. Having decided to go ahead with the transfer, Adam and his team worked extremely hard to facilitate the transfer. The QROPS pension trustees were not always the most professional or responsive organisation – however we were very grateful for the perseverance and commitment that Adam showed us as clients.

Jonathan – East Sussex

Adam offered a range of financial products , the one he suggested was affordable and proved to be a good choice.  Returns on investments have exceeded my expectations, based on Adam’s advice and guidance. Profits have enabled house improvements to take place.

David - Surrey

Adam arranged an appointment very timely, he explained his role and qualifications as an IFA giving me reassurance , we went through my retirement and investment goals. Adam discussed my options explaining in great detail, I felt relaxed during our discussions allowing me to fully understand my choices. I feel very confident in the financial advice allowing me to enjoy my retirement.

I was very happy with Adam’s recommendations and explanations of financial products which would suit my retirement goals, I feel this has helped me review and reduce my financial risk as I reach retirement, leaving me feeling confident that I can enjoy my retirement plans.

Ron – West Sussex

After initial meeting Adam put together a very detailed and thorough written plan. At our second meeting he went through the whole booklet and explained everything in layman’s terms which made it a lot easier to understand.

I am very happy with everything that was suggested and put in place especially with something as big and important as pensions. Adam and his team have taken a huge weight off my shoulders and I would highly recommend their services to anyone needing help with their financial planning and pension.  Adam couldn’t have been more helpful, and even came outside his normal area to meet me on a number of occasions.

Richard - Kent

Unfortunately I had to claim on my critical illness insurance due to my wife being ill and because of the sound advice Adam gave in acquiring this insurance we ended up being financially safe through a tough time.

Steve - Kent

Adam did a review of our financial situation, confirmed that Flexible Drawdown best suited our needs as a family, and then did all the research into the best product for us. He will continue to monitor it for me. He acted extremely promptly because we had a deadline for requiring the lump sum; went out of his way arranging meetings during non-office hours, was professional yet friendly and explained a difficult subject very well.

Clare – East Sussex

Adam did a thorough review of my pension policies, clearly explained how well they had performed, how flexible they were, how the market regulation has changed, and, crucially, what the tax implications would be if I were to leave them untouched. He accurately assessed my attitude to risk and recommended an up-to-date solution that will offer me the greatest flexibility at retirement.

Greg – East Sussex
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