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"Be nice to your kids. They'll choose your nursing home."
At metfriendly, we exist to help our members "Save; Invest; Protect". Membership of metfriendly is reserved for those connected to the police service in the UK, including those with a family connection. Over 2000 of our members are children whose savings plans are paid for by a relative, usually a parent or grandparent.
We all want our children to get a head start in life. Higher education is about to become hugely more expensive - although the availability of loans will enable the main cost to be deferred. Since the student loan only need be repaid once income is sufficient, it makes sense to borrow the maximum, and keep savings for other purposes such as putting a deposit on a house.
Friendly Societies have advantages over other life insurance firms in that up to £25 of your monthly premiums can go into a tax exempt plan - and these plans are available to both adults and children.
A children's plan taken out 15 years ago has shown impressive growth. Savings of £25 per month, a total of £4,500, would have grown to £7,640. These returns reflect both our investment performance and our capital strength. Past performance is no indication of future returns.
Now the government is going to open up ISAs to children, and we plan to offer this. Up to £3000 may be paid in each tax year until the age of 18. Up to the age of 16, the Junior ISA will have to be opened by a parent or guardian, although other parties may make the payments. Like the adult ISA, the money can be split between one provider for Cash and another for Stocks and Shares - but an important difference is that you will not be able to start a new provider each tax year.
At the age of 18, the "child" can gain access to the money, but can choose to keep it invested as an adult ISA. The fear for any sponsor is that when the child gains access to the money, they may not use it wisely. Some years ago, metfriendly changed its child savings plan to accept contributions up to the age of 24, and for the Junior ISA we plan to ensure the contract remains invested at age 18 until claimed. But you cannot deny the child knowledge of his or her savings, and control will pass to them at the age of 16.
The Junior ISA may well only be taken up by wealthier parents already using their own ISA allowances to the full. Otherwise, parents may well prefer to save in their own name and make over the funds to their children when they need it, or at least can be trusted with it. For grandparents, we think the Junior ISA is likely to represent too big a commitment, and we expect our traditional Friendly Society Savings Plan to remain popular with them.
Article submitted by Stuart Bell
Chief Executive at metfriendly
'metfriendly' is the trading name of Metropolitan Police Friendly Society Limited
• For further information visit
mpfs.org.uk or give them a call on 01689 891454