Investing for Children and Grandchildren: Our Guide to Building a Family Legacy

In this episode of Retire Well, we tackled a topic that comes up time and time again in our conversations with clients: how to invest for your children and grandchildren.

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Whether you're a parent thinking about your child's future or a grandparent wanting to leave a meaningful legacy, we’ve broken down the key options, allowances, and strategies that can help you do just that without getting lost in the jargon.

Jargon Buster: Expression of Wish Forms

One thing that often confuses people is the expression of wish form. Simply put, this is how you tell your pension provider who you want your pension to go to when you pass away. It’s not part of your will, so it’s really important to keep it up to date.

You can name multiple people - spouse, children, grandchildren -and even split the percentages however you like. It’s a small step that can make a big difference.

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Gifting: What You Can Give (and When)

When you're investing for someone else, gifting rules come into play. Here’s what we usually explain to clients:

• £3,000 annual gift allowance: You can give this amount each year without any inheritance tax implications.
• Gifts from surplus income: If you’ve got more income than you need, you can gift the excess—just make sure you document it.
• Seven-year rule: Larger gifts may be taxed if you pass away within seven years, but taper relief can reduce the tax after year three.

And remember: if your estate is below the Nil Rate Band (£325,000 or £650,000 for a married couple), you might not need to worry too much about these rules.

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Junior ISAs: A Great Starting Point

Junior ISAs are a brilliant way to save for children. You can put in up to £9,000 per child per year, and it grows tax-free. But here’s the catch: once they turn 18, it’s their money. That’s why we always say this should come with a bit of financial education.

Joe: “I used mine for university, but I’ve heard stories of it going on holidays and cars too!”

Generally, when investing over a long time period (potentially 18 years), we would have a preference over a Stocks and Shares ISA over a Cash. With a long time-horizon, there’s more opportunity for growth and time to recover from any market dips, but as always you should always invest in line with your attitude to risk and be aware that your investment can drop in value.

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Junior SIPPs: Thinking Long-Term

If you’ve already used your ISA allowance and want to go a step further, a Junior SIPP (pension) could be a great option.

• You can contribute £2,880 net per year, and the government tops it up to £3,600.
• The money is locked away until retirement, but that long time frame gives it serious growth potential.

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Matthew: “It’s a great way to give your child a head start on retirement - even if they don’t appreciate it now!”

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Lifetime ISAs: Helping with First Homes

We also talked about Lifetime ISAs (LISAs) which are a great tool for helping kids save for their first home.

• Contribute up to £4,000 per year, and the government adds a 25% bonus.
• The house must cost less than £450,000, and the account must be open for at least 12 months before buying.

Just be careful: if they don’t use it for a house or retirement, there’s a penalty for withdrawing the money.

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Trusts and Offshore Bonds: For Larger Gifts and More Control

If you’re thinking about larger gifts or want more control over how money is used, trusts can be a powerful tool.

Two Main Types:

Bare Trusts: Offer simplicity and transparency, with assets held for named beneficiaries who have an immediate and absolute right to them.

Discretionary Trusts: Give trustees greater control over how and when assets are distributed, making them more flexible, but often more complex and potentially subject to additional tax considerations.

We often pair these with offshore bonds because they’re tax-efficient and easy to manage. Trustees can assign segments to beneficiaries when needed.

Matthew: “It’s about control, flexibility, and protecting your legacy.”

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Listener Question: Should I Save in My Name or Use a Junior ISA?

We get this one a lot and as with most aspects of financial planning, it depends on your personal circumstances.

If you want control, keep the money in your name and gift it when the time is right.

If you want to build financial habits and give them a head start, a Junior ISA is a great tool - just make sure they understand the responsibility that comes with it.

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Final Thoughts: It’s About More Than Money

At the end of the day, investing for children and grandchildren isn’t just about tax efficiency - it’s about education, empowerment, and building good habits.

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Joe: “There’s not enough financial education in schools. This is a great way to teach kids about money early.”

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Whether you’re using a Junior ISA, a pension, or a trust, the most important thing is to align your strategy with your family’s values and goals.

Don’t forget, you can get in touch with us directly about our ongoing financial planning services by emailing us at enquiries@wealthofadvice.co.uk, or you can sign up to our monthly newsletter to stay in the loop with us and the team.

Thanks for reading - and for listening! If you’ve got questions or want us to cover a specific topic in a future episode, drop us a comment or message. We love hearing from you.

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