Investing for children and grandchildren – your options

Daniel Hough
Associate Director, Wealth Manager
RBC Brewin Dolphin

Intergenerational planning has long been a focus for our clients, but inheritance tax (IHT) reforms, increased longevity, frozen tax thresholds and worsening housing affordability for younger generations have brought the issue into sharp focus.

For years, pensions have been a tax-efficient way to transfer wealth across generations, but the government has confirmed that unused pension funds and death benefits will fall into the scope of IHT from 6 April 2027. As a result, we’re seeing increased interest from clients wanting to explore efficient ways to pass on wealth – not just at the end of life, but at the moments when it matters most.

For those with substantial pension pots, revisiting how your estate is structured and embracing strategic intergenerational gifting can be an effective way to support your family now while managing your IHT bill.  

If you’re hesitant to gift cash lump sums to your children or grandchildren due to concerns about how the money will be spent, contributions into Junior Individual Savings Accounts (JISAs), Junior Pensions (JSIPPs), and trusts are alternative options to consider.

Junior Individual Savings Accounts

Imagine your grandchild accessing their account at 18 and seeing years of growth waiting for them. JISAs give you a tax-efficient way to invest for their future, while keeping the money protected until they’re ready.

Here’s how it works:

• Only a parent or legal guardian can open a JISA, but anyone can contribute, provided the total doesn’t exceed £9,000 per tax year across all JISAs held.
• Children are allowed to hold two JISAs – one cash account and one stocks and shares account.
• Typically, the JISA provider will write to the child at 16 to make them aware of the account and its value, but funds remain locked until the child turns 18.

The numbers tell a powerful story. Data from RBC Brewin Dolphin obtained through a Freedom of Information request to HMRC in 2024 shows the top 50 stocks and shares JISA accounts were averaging £761,000 in value. Even modest monthly amounts can grow substantially over 18 years. Here’s what’s possible:

How much a child might receive by 18 with varying monthly contributions into a JISA from birth?*

Contribution	Value at age 18
£150 per month	£52,380.30
£300 per month	£104,760.61
£450 per month	£157,140.91
£600 per month	£209,521.21
£750 per month	£261,901.52

Junior SIPPs

Give your grandchild a head start on retirement that few people ever get. JSIPPs are a longer term, age-restricted investment option for children and grandchildren that is sometimes overlooked.

Your contributions receive 20% basic tax relief, and because the money is locked away, it can benefit from decades of compounding. By the time they retire, that early gift could be worth far more than you might imagine.

Here’s how it works:

• Contributions to JSIPPs are capped at £2,880 per year but get tax relief up to £3,600.
• Like JISAs, a JSIPP switches over to a regular SIPP when the child turns 18, at which point they can view and control the funds.
• Currently the minimum age to access a SIPP is 55 years and this is due to increase to 57 years from 6 April 2028.

How much could a child receive at retirement age with varying annual contributions into a JSIPP from birth to 18?*

Contribution	Value at age 18	Value at age 57
£1,880 per annum	£51,190.74	£358,349.01
£2,880 per annum	£102,381.47	£716,697.95

Trusts

Trusts let you support your family on your terms – you maintain control while still giving generously. Assets can be held and managed for the benefit of beneficiaries such as children or grandchildren.

More families are setting trusts up because of the long-term freeze on IHT thresholds (the ‘nil rate band’ has been frozen at £325,000 since 2009), which has brought more estates into the scope of 40% IHT, due to rising asset values.

In fact, a recent Freedom of Information request by RBC Wealth Management revealed that around 10,000 UK-resident trusts were registered to the Trust Registration Service in January 2025. For those keen to retain control over the money they are gifting to the next generation – without making them aware of the savings at an early age – trusts can be a useful option to consider.

According to Daniel Hough, a wealth manager at RBC Brewin Dolphin: “Clients might look at Junior ISAs and think ‘I don’t want the kids getting access at 18’, but then they don’t want them to wait until they’re 57 either. Trusts allow them to retain control and decide who gets what – and when.”  

What you need to know: there are two main types of trust to consider, each with a different framework and tax implications.

Bare trust

• A child is legally entitled to access and control the assets held in a bare trust when they turn 18 (16 in Scotland).
• For tax purposes, assets held in bare trusts are usually treated as belonging directly to the beneficiary. If a parent set up the trust and income exceeds £100 per year, the parent will be liable for income tax on all of the income.

Discretionary trust

• A discretionary trust allows trustees to decide how and when to distribute income and capital to beneficiaries – enabling them to protect assets and manage beneficiaries with complex needs.

Hough suggests a rule of thumb, “If your total assets – home, cash investments, pensions – add up to £1.5 million or more, trusts are worth exploring.

“There are various tax implications and positions to consider in each trust arrangement depending on the framework (for example, whether it’s a bare trust or a discretionary trust), but trustees can distribute funds as and when required, for example to cover the costs of higher education, a house purchase or a wedding. When establishing trusts, it’s advisable to consult a tax adviser so you get the full picture.”

Timing gifts to children and grandchildren is crucial. “Make sure that the wealth you’re able to give them helps them now,” stresses Hough. “There’s no point leaving them a lot of money in 10 years’ time if you’re going to lose 40% of it to inheritance tax. They might not need much help, but it might just give them the ability to say, pay off a chunk of their mortgage, help with a car or pay for nursery fees. It’s about making sure the wealth is cascading down in the right way, in the right place and at the right time.”

If you have any questions about this content or would like to explore how to invest for your loved ones, speak to your wealth manager.

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The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute financial planning, tax, or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. You should always check the tax implications with an accountant or tax specialist. Information is provided only as an example and is not a recommendation to pursue a particular strategy.