School Fee Planning
Early financial planning is very important for those who wish to help fund for their children's education. The sooner you're able to start saving, the greater the opportunity for your mony to grow. Saving plans can be tailored to meet your requirements making use of tax efficient saving vehicles where possible.
Individual Savings Accounts
From the 1st July 2014 ISA's were simplified and are now known as, the 'New ISA' (NISA) and all existing ISA accounts will become NISA accounts. The annual subscription limit for tax year 2019-20 is £20,000. Under the new rules, account holders can save the whole allowance in cash, stocks & shares or any combination of the two.
Set up by the Government in November 2011 to replace the Child Trust Fund, the Junior ISA is a tax-efficient savings opportunity designed not only for parents, but to allow family and friends to invest in a child's future.
All UK resident children under the age of 18, who do not have a Child Trust Fund, will be eligible for a Junior ISA.
Junior ISAs share the same tax benefits as a normal adult ISA, but they’re exclusively available to people under the age of 18, They're a great way to invest for a child, for the medium to long term.
A maximum of £4,368 can be contributed to a Junior ISA in the 2019-20 tax year. This can be split between cash and / or stocks & shares providing the total combined investment between the two accounts does not exceed the maximum limit. The junior ISA allowance will increase in with CPI on an annual basis.
The money in a Junior ISA belongs to the child, but they can’t take the money out until they are 18. They can then decide what they want to do with it. If the child chooses not to take the money out, the Junior ISA will automatically become an adult ISA.
Lifetime ISAs (LISA’s) are a new type of Individual Savings Account available from 6 April 2017 for young people (18 to 39 year olds) to save or invest up to £4,000 p.a. for either the purchase of their first home or for their retirement or both.
Contributions must not exceed the annual allowance and must cease at age 50 - so a maximum of £128,000 in total can be paid into this type of plan. For every £4 paid the government add a £1 so the maximum bonus that could be obtained is £32,000.
Where funds are used for retirement this must not be before age 60. Upon reaching age 60 all funds including the government bonus can be withdrawn without penalty and tax free.
LISA holders may make full or partial withdrawals at any time but if not connected to a first home or retirement the government bonus, earned including any interest or growth on that bonus, will be lost and an additional 5% early withdrawal charge will be levied.
A LISA may be transferred to another provider and it should take no longer than 30 days.
Help to Buy ISA
To help save towards a first home, the government are offering a bonus investment scheme whereby a 25% bonus (capped at £3,000) can be claimed on savings balances above £1,600.
Eligibility criterion to open an account is as follows:
- Be aged 16 or over and have a National Insurance Number
- Be resident in the UK
- Have never been a residential property owner
- Use the government bonus paid in its entirety towards the purchase of a property of not more than £250,000 outside London or £450,000 inside London
- The property must be the main residence and be purchased with a mortgage
- Contributions must not exceed the ISA allowances
- Not have an another active Cash ISA in the same tax year
- Have not previously received a payment of a bonus amount under a Help to Buy ISA
- Complete an Eligible Customer Declaration
The Help to Buy ISA must be cash based and the accounts are available to each first time buyer, not each household. Savings of up to £200 a month can be made in addition to an initial deposit of up to £1,200. Applying for the bonus must be undertaken by a solicitor or conveyancer.
Once an investor has chosen an ISA provider or a particular fund, there is no reason why this cannot be transferred to another provider and fund at a later date. This may involve a charge with some providers.
Maximum Investment Plans
This is a form of endowment plan which is made up of minimal life assurance and a savings plan. It has a term which will usually mature after ten years, although there may be an optional facility to remain invested after this date.
Friendly Society Bonds
Friendly societies offer endowment policies where contributions of up to £25 per month or £270 per annum can be invested into tax-exempt funds.
This summary in no way constitutes a complete explanation of the saving products detailed above, or how they may suit you. For further details of savings plans and how these may help your personal circumstances please seek independent financial advice.
The Financial Conduct Authority does not regulate taxation advice.
The value of investments can fall as well as rise and you may not get back the original amount invested