I have £5000's that I would like to invest for my two grandchildrens' education when they reach university age.
They are both under 5 years of age. What is the best form of investment for this purpose that will avoid any tax?
Thank you for your question; your wish to help your grandchildren is a very warm thought.
Perhaps one way forward is to invest in a 'Junior ISA' (JISA). These, like their adult equivalents, are tax-favoured accounts, but are designed for children. The maximum contribution per child in any one year is £3,600, but they are not available for all children, so be careful - because children who have a Child Trust Account are not allowed to have an ISA. The fund is available to the child at age 18 - and this is something to consider, because if, for some reason, they are going through a difficult time they will be given extra money at a stage in their life where it might be better to withhold that opportunity and, of course, they might spend the money on things other than education.
May I make an alternative suggestion, though, if you would like to consider a longer-term investment for the children? This is a pension contribution - again, £3,600 maximum per child (with tax relief the actual contribution would be £2880). Such a contribution would be of enormous benefit, especially since younger people are likely to have a real uphill struggle to secure a financially comfortable retirement, and you might be surprised at the illustrated fund size (even after inflation) after 60 or so years. It would also have the very healthy effect of helping to create a good attitude towards this important area in their lives.
Best wishes, David Carter
| 10.08.12 @ 10:25