Protecting your children for the future?

You may agree that there is little financial education available for the younger generation. One of our key objectives is to ensure our clients’ children have the financial education they need, bespoke to their needs.

Childhood pensions

Encouraging your children to take control of their pensions may not always be an easy task. They may not deem pensions to be important, given they cannot access the funds until at least age 57 under current legislation. Pensions can also be complex and because of the lack of education, the younger generation may not realise the power of funding their pensions in their younger years, the benefits of compound growth or the benefit of having the right investment management.

Many of our clients may wish to incorporate their children into their pension planning. As such, we have developed multi-member pension arrangements, allowing our clients’ children to consolidate or build their retirement fund in a family pension arrangement. This means our clients’ children can have the benefit of receiving advice and investment management while benefiting from only having fees associated to their share of the fund rather than the full cost themselves.

University and school fees

For many parents and grandparents, establishing a financial strategy to pay school and university fees, in a tax efficient manner, is a huge focus.

There are many options to consider in identifying the most appropriate route. A thorough understanding of your current financial position is essential. Many parents and grandparents may have surplus income each month, so we can look at whether gifting out of regular expenditure is suitable. We will always ensure these gifts are documented correctly.

Investing funds appropriately in trusts for the children or grandchildren is another option. Our dedicated consultants can go through the options available and that are most suitable to your individual circumstances.

Junior ISAs

In addition to major expenses such as school or university fees, your children might want to purchase their first car, put a deposit down on a home or even marriage.
Just as your loved ones are about to stand on their own two feet, most parents do not want to see their children weighed down with debt. Currently 1.3 million students in higher education in England receive a student loan – with the government loaning £17 billion each year – leaving the average student with around £40,000 of debt1. Therefore, by starting to invest for them now, in an ISA structure can make covering those costs easier in the future, especially as any investment returns are free from liability to income tax and capital gains tax for both you and your child.

Getting planning in place sooner rather than later can be hugely beneficial to you and your children, as you can build a sizable pot over a long period of time, while benefiting from potential growth on the underlying investments.

By providing financial education from an early age, we can ensure young adults understand the rationale behind the advice and can talk through the investments held to allow them to build up an understanding. By helping to create a wider picture, they should be encouraged to make the most of their pensions and investments from an early age, as they understand and can see the value of them.

With social media nowadays, many young adults are investing into high-risk investments with lack of knowledge or experience. Therefore, with the help of your consultant you can have peace of mind your children are getting sound investment advice.

Furthermore, Mattioli Woods has a team of in-house investment managers who actively manage our investment portfolios. We offer a variety of different investments for our clients and their children to invest in, dependent on their needs and risk appetite. As your children get older, we can adjust the risk profile as appropriate, thus providing a truly bespoke strategy for them.

1 https://commonslibrary.parliament.uk/research-briefings/sn01079

Nathan Smith DipPFS is a wealth management consultant at Mattioli Woods plc.