Childrens Bonus Bonds Problem

Childrens Bonus Bonds Problem.

This week National Savings and Investments (NS&I) finally withdrew its Children’s Bonus Bond.

What does that mean for children’s savings?

Before 24 September 2017 (last Sunday), when a Children’s Bonus Bond matured, you could roll over those savings in another Children’s Bonus Bond (current rate tax free savings 2%).  This is no longer available.

The most common option will be to reinvest the proceeds in a Junior ISA (cash based or stock market linked).

What if I have already invested the maximum in a Junior ISA this year for my child?

There lies the problem.  If you have already used up the allowance then the options are as follows:

Where to invest Children's Bonus Bonds at maturity?

Open other savings accounts ‘designated’ for the child and complete tax forms to ensure any interest is paid tax free.

Open stock market linked investments such as unit trusts  or investment trusts.  Again, these will need to be ‘designated’ for the child to be potentially tax free.

• What is designation?  The savings account or investment is in an adults name (as children cannot sign contracts) but is designated for them as the beneficial owner and therefore attracts any tax free breaks a child may have

Invest in a pension: Many people do not know that your child can have a pension fund even if they are non-tax payers.  You can invest up to £2,880 each year in a pension for a non-tax paying child and with tax added at 20% (even though non tax payer) it is made up to a total gross contribution of £3,600.  That’s a £720 bonus for free.