Grandkids’ possible £78,700 inheritance

As new research reveals that four in 10 households could potentially be facing a 40 per cent Inheritance Tax bill, The Children’s Mutual is urging grandparents to consider investing on behalf of their grandchildren as a means of avoiding giving too much to the taxman.

Research from The Children’s Mutual shows that 85 per cent of grandparents would be prepared to invest for their grandchildren’s futures, and that this financial helping hand could make a big difference to younger generations.

By gifting the maximum annual allowance of £3,000 each year into a long-term investment plan, a grandchild could benefit from a lump sum of around £78,700 at age 18.

David White, Chief Executive of The Children’s Mutual, said: “There is no doubt that many grandparents want to save for their grandchildren but have different requirements to parents and may want to do so separately.

“For many grandparents it is also important to retain a level of control over the money they have put by and increasingly they need to consider the implications of inheritance tax. This is where financial advice can play a key role. For those advisers already looking at inheritance tax planning, considering ring-fenced investment for a grandchild could be an additional option to help their clients while also helping to provide that child with a financial springboard into adult life.”

Growing Up Bond from The Children’s Mutual is specifically designed to help grandparents who want to save or invest on behalf of their grandchildren. Offering investment in up to 11 OEIC funds, provided by four leading fund managers, it enables them to pay in either lump sums or regular contributions, or a combination of both,with no upper limit. At the outset they can establish a target and will then receive a yearly progress check so they can look to see if their investment is on track towards achieving that target. There is also an optional lifestyling feature, evoked five years before the target date, to enable a gradual transfer of money from share-based funds to less risky options such as a fixed interest and bond fund.

In addition Growing Up Bond can be written in trust to ensure that the eventual lump sum goes to the child at the appropriate time. It is also possible to establish a trust which enables the release of money to coincide with particular events, such as a lump sum to help with the costs of each year of a university course. People should speak to their financial adviser if they want to know more about trusts.

The minimum monthly contribution to Growing Up Bond is £50, however the minimum investment into each of the eleven funds is only £25 a month. The minimum lump sum investment is £250 and there is no upper investment limit.