Investing for the next generation

When your child or grandchild is young, their retirement plans might be the last thing on your mind.

But by investing for them as early as possible, you can give them a fantastic financial head start – whether that’s by thinking really long-term and establishing their pension pot, or building a nest egg to help them earlier in their adult life.

Junior ISAs

When it comes to investing for children, tax can make a big difference to returns over the longer term. So, it’s worth considering some tax-efficient ways to save for your treasured little ones.

Junior ISAs are a tax-efficient way to grow a nest egg for your kids or grandkids, ready for them to access later in life. Like regular ISAs, the junior version incurs no UK Income Tax or Capital Gains Tax on any growth, and can be either held in cash or invested in stocks and shares. Please note NFU Mutual only offer a stocks and shares Junior ISA and you can open one online.

While grandparents aren’t allowed to open a Junior ISA for their grandchildren, once one is set up by parents or a guardian, they can make contributions up to the annual limit, which is £9,000 for the 2024/2025 tax year . The earlier you start, the better, as the sum has the potential to benefit from compound growth.

A Junior ISA account converts to an adult ISA at age 18. At this point they can choose to continue with the investment or take out some, or all, of the money.

If you have added money to their account regularly then you could really make a difference, whether it’s to help with university costs or take their first step onto the housing ladder.

A children's pension

You might prefer to build a pot of money which your loved one can’t access as young as 18. If that’s the case, then another tax-efficient option you could consider is to start growing a pension fund for them.

The age at which they can access this pension pot is gradually rising; from 2028, it will be accessible from age 57, and after that will remain at 10 years below State Pension Age.

Like Junior ISAs, children’s pensions also have significant tax advantages: for every £80 contributed a further £20 will be added in tax relief. When they reach 18, or later, they can continue to build on this fund.

There are other options available to parents or grandparents who want to provide a financial helping hand. For example, trusts can help if you want to retain control beyond the child’s 18th birthday, or if you want to be able to allow other children in the family to benefit in the future.

Please be aware the tax treatment of pensions and ISAs depends on individual circumstances and may change in the future. The value of investments can fall and you may get back less than you invested.

Whether you’re looking for expert financial advice, or you’re confident managing your own finances, NFU Mutual can help you.

If you need financial advice, you could choose to speak to one of our Financial Advisers who can offer expert financial advice based on your personal circumstances and goals. Find your local NFU Mutual Financial Adviser, or call us on 0800 622 323, option 3.

If you already know how much you'd like to invest and your financial goals, then you can do this online or over the phone.