Save for your child tax-free with Children’s Bonus Bonds
Are you interested in planning for your child’s future with children’s savings?
Have you considered ISAs as a form of savings for children?
“Now that the Government has confirmed it is to drastically scale down the Child Trust Fund scheme, Children’s Bonus Bonds may be the next rising star in the world of children’s savings.” Gareth Flanagan, Managing Director, Principle First Financial Advisers
Children’s Bonus Bonds are a secure children’s savings option from NS&I, which can provide your child with a lump sum at a key point in their life. The lump sum is tax-free – there is no Income Tax or Capital Gains Tax payable on the Bond. This could mean a ‘cracking little nest egg’ just in time for going to college, or even as a deposit on their first home.
Given that the cost of 3 years at college for a child born today will be approximately £64,000 (Sources: NUS/Investec), a tax-free lump sum at the right time could mean a real opportunity for your child - and Children’s Bonus Bonds are a tax-efficient way to achieve that.
Of course, if your child is not destined for college, he or she may wish to continue their Children’s Bonus Bond for a little longer - but the bond must be encashed by the time they turn 21, after which it no longer qualifies as savings for children.
How does a Children’s Bonus Bond work?
A Children’s Bonus Bond can be started with an initial investment of just £25, and any capital saved into the bond is guaranteed by NS&I, through its link to HM Treasury. In other words, you cannot lose your savings for your child in a Children’s Bonus Bond - they are 100% secure.
The Children’s Bonus Bond operates on the basis of ‘issues’, with a maximum investment limit of £3,000 for each issue of the bond, in multiples of £25. Each issue will carry its own individual rate of interest, in other words, returns may vary from one issue to the next.
The good news is this brand new £3,000 limit for each issue. If there were four issues in the same year, for instance, you could invest up to £12,000 in children’s savings for that year.
Cash invested in the bond is officially the property of the child, but is controlled by a parent or guardian until the child turns 16. At this point, control of the investment passes over to the child.
Children’s Bonus Bonds as Gifts
It is worth noting that Children’s Bonus Bonds do not have to be bought for your own child. A Children’s Bonus Bond can make a great gift for your niece, nephew or someone else’s child too. However, control of the children’s savings in the Bond always lies with the child’s parent or guardian, and not with the person who bought the bond.
Your Children’s Bonus Bond earns interest at the agreed rate relating to its issue, and on the 5th anniversary of its issue date attracts a bonus, which is also set and guaranteed at the time of the issue. An additional bonus is paid on your child’s 21st birthday, if the bond is still being held at that time.
Calculating what your return will be at the end of 5 years is simplicity itself, using the handy calculator on the NS&I website.
Are you interested in saving for your children? Read more about children’s savings here, make an online savings advice enquiry, or ring our freephone 0800 678 5929 for more information now
