Many grandparents want to help save for their grandchildren as they often have wealth they would like to pass down. We see this on Beanstalk as lots of grandparents use our Invite tool to link and contribute to their grandchild’s Junior ISA. In this article we answer some frequently asked questions by grandparents when it comes to saving for their grandchildren.
1. How can grandparents save for their grandchildren?
There are many different ways that grandparents can save for their grandchildren, including:
- Paying into Junior ISAs
- Opening a savings account
- Buying Premium Bonds
- Setting up a Junior SIPP
We explore all of these different ways in our Saving For Grandchildren article.
2. Can a grandparent buy Premium Bonds for a grandchild?
Yes, grandparents can buy Premium Bonds for their grandchildren as long as the child is under 16. Premium Bonds are a savings products offered by NS&I a state owned savings bank in the UK. You don’t earn interest on your savings with Premium Bonds, instead there is a monthly prize draw for a tax-free prize and each Premium Bond has a chance of winning.
The Premium Bonds are in the child’s name and the grandparent must ask a parent or guardian to manage the bonds until the child turns 16. If the child/parent are not already NS&I customers, they will ask the parent/guardian to provide proof of their own and their child’s identity.
3. Can grandparents contribute to a Junior ISA?
Yes, Junior ISAs allow contributions from grandparents (and other family and friends), it’s one of the benefits of this type of account. However, how easy this is to do can vary from provider to provider. On the Beanstalk app parents can use our unique Invite tool to link grandparents to their grandchild’s account so they can save directly into the JISA.
Each child has a £9,000 Junior ISA allowance which is the total amount that can be contributed in a tax year across the JISAs they have. Savings are in the child’s name and are locked away until the child turns 18, which makes them popular with grandparents as no withdrawals can be made by the parent.
4. Can grandparents open Junior ISAs for their grandchildren?
Junior ISAs can only be opened for a child by a parent or legal guardian so grandparents cannot open a Junior ISA for their grandchild.
Beanstalk really simplifies this process compared to other providers. On Beanstalk grandparents can start the account registration process by registering the child and the amount of money they would like to contribute. An email is then triggered to the parent to complete the application process. Once done the grandparent is notified that the Junior ISA is open ready for them to start contributing.
Beanstalk also allows the parent to decide how much information on the account is shared with the grandparent so if the grandparent is the one funding the account, the parent can give them full account access.
5. What ISA allowance do grandparents have for their grandchild?
Grandparents don’t have a specific ISA allowance for grandchildren. Adults in the UK have a £20,000 ISA allowance and children under 18 have a £9,000 Junior ISA allowance. This is the total amount that can be contributed in ISAs / Junior ISAs within a tax year.
6. Are there tax benefits in giving to a grandchild?
Grandparents giving money to their grandchildren may offer inheritance tax benefits. Inheritance tax is charged at 40% on estates above £325,000, with exemptions for spouses or civil partners.
Gifts may still count toward the estate if the donor dies within seven years of gifting the money, though taper relief reduces tax over time. Gifts within three years are taxed at 40%, falling to 8% after six years, and none after seven.
Grandparents do have an annual £3,000 gift allowance that is tax-free. Using this allowance means most smaller gifts escape inheritance tax, while larger gifts may benefit from taper relief if made well before death. If the whole £3,000 is not used in a single tax year then the remaining balance can be rolled-over to the following year. However, remaining allowances do not roll over a third year, so will be lost if not used.
It’s also possible for grandparents to give an unlimited number of small £250 gifts in a tax year as long as they’re going to a different person each time and not to a person who has already been gifted a larger amount within the tax year.