Due to fraud and anti-money laundering rules, saving a nest egg for grandchildren living abroad is a complicated endeavour. Rarely will the UK banking system allow someone to open an account for a child that is living abroad.
Whilst there are ways that you can start saving for your grandchildren, you may want to think about where your grandchild is likely to be living when it comes time to access the money. Is the move abroad a permanent one or are they likely to have returned to the UK by the time their savings mature? This can affect the choice you make from the options below.
- Best Savings Options for Grandchildren Abroad
- Can I open a savings account for my grandchild who lives abroad?
- Check for existing bank accounts
- Child Trust Fund
- Junior ISA
- The difference between Cash ISAs and Stocks and Shares ISAs
- Premium Bonds free from UK Income Tax
- Save into a UK account in your own name
- Stocks and Share ISA
- Bare trust – What is it?
- Use Wise.com to send money overseas
- Ensure you have adequate retirement planning
Best Savings Options for Grandchildren Abroad
Below is my list of the best investment providers to open a savings account for grandchildren living abroad.
- Wealthify – Start investing from £1
- Interactive Investor – Best for self-invested Junior ISAs
- Beanstalk – The family app that invests in your kids
- Bestinvest – Low rates for Junior ISAs from 0.2%
Can I open a savings account for my grandchild who lives abroad?
The simple answer is no. For the reasons I have mentioned above, it isn’t possible to open a children’s savings account unless the child in question has an address in the UK or their parents are considered a ‘Crown servant’ such as UK’s armed forces, overseas civil service or diplomatic service.
Check for existing bank accounts
This might seem obvious but have you checked that your grandchild doesn’t already have a UK bank account, opened by a legal guardian, that you can deposit money into? Often parents will set one up before the move abroad and grandparents can make regular contributions.
However, be aware that a national savings account, with the current historically low interest rates, wouldn’t represent the best way to grow a nest egg.
It is worth checking the interest currently being earned on the saving account in question. Currently some of the best interest rates being offered on savings accounts can be found with a Building Society.
Child Trust Fund
If your grandchild was born in the UK between August 2002 and August 2010, they will have a Child Trust Fund in place. These were set up automatically by the government and invested in a variety of funds. The good news is that parents and grandparents can deposit up to £9,000 a year into a child trust fund simply by contacting the provider.
Lost Child Trust Funds are easy to trace. Simply go to the GOV.uk website and fill in the HM Revenue and Customs (HMRC) form.
Junior ISA
Free from UK income tax, Junior ISAs offer a tax efficient means to save for children. Saving into a Junior ISA will mean that any money held within the account will be inaccessible until the child named as the account holder turns 18. Once they turn 18, the child can choose to withdraw their money, or alternatively the funds will be automatically transferred to an adult ISA.
Who can open a Junior ISA?
Only parents or legal guardians can open a Junior ISA and it would be impossible to open a JISA for a child that is already living abroad, however, it is worth checking if an account was opened before the move.
How much can you contribute to a Junior ISA?
Contributions into an ISA can be up to the value of £9,000 in any tax year.
It is worth considering that there are two main types of Junior ISA available:
- A Junior Cash ISA
- Junior Stocks and Shares ISA.
A Junior Cash ISA will offer interest on any savings held within the account, however, with interest rates being so low, it would be better if you could contribute to a Junior Stocks and Shares ISA which acts much like an investment account and will allow you to invest their savings on various stock markets to grow your grandchild’s wealth tax free.
Also consider: Will ISA rates go up?
It is possible to purchase premium bonds for grandchildren overseas, although you should check whether it is legal to hold premium bonds in their country of residence as some countries have strict gaming and lottery laws. This would be free from UK income tax and you could win prizes although there are no guaranteed returns with premium bonds.
Save into a UK account in your own name
Whilst only legal guardians can open an account in a child’s name, one way to get around the issue would be to open a UK account in your own name and bequest this account to your grandchild in your will. Unfortunately, this would mean that the amount in the account would be subject to inheritance tax.
However, the benefit here is that you could transfer the funds across to the child as you see fit.
Of course you wouldn’t be able to access the benefits available in a Junior ISA when opening an account in your own name, however, you could open an adult stocks and shares ISA and invest the money on the stock exchange in order to grow their funds free from capital gains tax.
Should the child return to the UK after the age of 18, this amount could then be transferred into the UK’s Lifetime ISA, in order to trigger the generous government contributions and tax benefits and act as a retirement savings account or alternatively be used to purchase their first home.
Remember, if you open an ISA for your grandchild in your own name, this will be subject to your annual ISA allowance, and therefore you will need to consider any of your own ISAs that you have.
Bare trust – What is it?
A Bare Trust allows you to name a beneficiary who then owns both the income and the capital held within the trust. You can then appoint trustees to look after the trust until the child comes of age.
Your grandchild will gain control of the assets held within the trust when they reach the age of 18 and as long as you have survived for seven years following the transfer into the trust, your grandchild will be exempt from inheritance tax on the amount held within the trust.
Trust planning can be complicated so I would recommend that you get financial advice before proceeding down this route.
Use Wise.com to send money overseas
Wise.com, formerly TransferWise, allows you to send money overseas with some of the best currency exchange rates available. This means that if your grandchild is not a UK resident, you can ask the children’s parents to set up a savings account in their country of residence into which you can make regular contributions using Wise.com.
Whilst this may not be the most cost-effective way, it may mean that your grandchildren can make use of some of the interesting government-backed products in their country of residence, which may offer lucrative ways to save, especially if they are planning on moving overseas permanently.
Ensure you have adequate retirement planning
Do you have enough savings to provide for your retirement? Consult with a financial advisor should you be in any doubt before you gift any money to your grandchildren.
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