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Saving for Children
“There is always one moment in childhood when the door opens and lets the future in.” Graham Greene
At metfriendly, we offer our members the opportunity to “Save; Invest; Protect”. Our members include over 2000 children whose savings plans have been sponsored by a parent, relative or family friend. These plans can build up to a substantial sum – thousands of pounds – giving the child a head start in the adult world.
Friendly societies are able to offer savings plans which are tax-exempt where the monthly premiums are limited to £25. Sponsored plans belong to the child and the premium limit applies to the child – so a sponsor can take out a plan for him/herself and for as many children as they wish.
These tax exempt plans enjoy the same privileged tax treatment as ISAs. Of course, we pay a higher return to our members when they invest in a tax-exempt product. The restriction on premiums means that adults will often prefer to look at our ISA, but for children we believe that the friendly society savings plan is ideal.
Our children’s plan can be taken out up to the age of 14. It runs through until the child is 24, but can be cashed in early – with special options to request early payment on the child’s 18th or 21st birthday. These options only apply if premiums have then been paid for 10 years – that is the main commitment required to benefit from the tax privileges.
Following the demise of the Children’s Trust Fund, it is harder nowadays to find suitable investments for children. Parents need to be particularly careful as they can be taxed on their child’s income if they provided the money to invest in the first place. Our plan’s tax exempt status applies even where a parent is the sponsor.
Like all our savings plans and lump sum products, the children’s plan is part of our with profits fund. This fund is invested widely including substantial holdings in government and corporate bonds, equities and commercial property. We publish the performance of products invested in this fund on our website.
Our children’s plan has been running for 18 years and the original plans were limited to a monthly premium of £18. Over that period, for plans maturing this year, the £3,888 saved has more than doubled!
Stuart Bell
Chief Executive at metfriendly
