Hi. We expect our first baby soon. My Partner and I were thinking of opening a separate account so that any monies received for teh baby like child benefis, gifts, etc will go into that account. We also hope to contribute
50 a month towards the savings as well.Is there any saving account that are for this purposes. Can the account be opened in the name of the baby or do we have to open in one of our names.
Any help will be highly appreciated
If you start looking for a specialist account you will pay specialist fees.
Look at opening a normal account in your baby's name. Until the baby is 18, the account will need to be operated by nominated adults. Consider a normal (no fees, but interest paying) building society account or an investment trust / unit trust savings scheme.
Remember that pregnant women's hormones are all mixed up (don't tell her this!) so don't rush into anything until you can both see things clearly and are sure you can afford to save. Cots, prams, clothes and baby seats are expensive if you buy new. It would certainly be worth getting lots of brocures and leaflets to mull over.
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Consider also a stakeholder pension scheme. Then the government will give you a significant extra contribution.
R22% of the contributions. You pay 22% tax when you take the money back out, and as the idea is that you should be taking out more than you put in, this means the government makes a profit on the deal.
However, get specialist advice as to how to constitute that account so that it is legally ring-fenced for the child. Unless you're careful, anything in that account is considered part of your own finances for the purposes of means-tested benefits, bankruptcy, etc.
Jon (who's carefully not describing how to do it, because I don't want you to follow my advice, get it wrong, sue me and relieve me of my kid's money when it all goes wrong!)
More accurately it's 22% of the combined contributions, i.e. of whatever your contribution is 78% of. In other words it's 28% and a bit of what you put in.
That's one way of looking at it. Here's another.
You put £780 into a SHP and the government puts in £220 making it up to £1000. You immediately smash the piggy-bank (assuming you're over 50) and take out your 25% tax free lump sum and buy an annuity with the remaining £750. Say the annuity pays 6% for life, which gets taxed at 22% so is worth 4.68% to you. But as this £750 annuity only cost you £530 to buy, it's really worth 6.62% to you, which is more than you could have gotten if you'd gone and bought a 6% untaxed annuity with your £530. Effectively you're paying *negative* income tax at
10.4%. This means the government makes a loss on the deal.:-)
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