Becoming a grandparent is undoubtedly one of life’s great moments. Whether you are a first-time grandparent, or have amassed a commotion of grandchildren (yes, that is the collective term), you may be thinking about how you can save or invest for your grandchildren to ensure they can access funds when you think they might benefit from them most.

There are many ways to support your grandchildren financially. Rachel Wyatt, Wealth Planner at Arbuthnot Latham, has provided an overview of some of the key considerations and solutions that are available.
Gifts & Inheritance Tax

Grandparents often use gifting to minimise inheritance tax payable on their estate. However, due to changes in pension regulations effective April 2027, any unspent pension funds will also be subject to inheritance tax. This could reduce the total amount you can pass on to your beneficiaries.

Lifetime gifts (or settlements into trust) may include money, possessions and property. The rules are complicated, but anything left in your taxable estate will be assessed for inheritance tax. There are gifting allowances and exemptions for inheritance tax which grandparents (and other individuals) can utilise.

Timing of Support

You may want to consider your gifting strategy based on your timeline and the life stage of your grandchildren.
You may want to make regular gifts into an instant access cash account or savings account. This can encourage children to become financially savvy from a young age.
Regular gifts made from surplus income may qualify for an exemption for inheritance.
You may prefer to make a lump sum gift that your grandchildren can access at a pre-agreed date, meaning they may benefit from these funds at a time when they are likely to need it, for example, education costs, getting on the property ladder, travelling, or even at retirement.
Furthermore, you may prefer to leave something in your will providing you with control and access to your finances during your lifetime.
Which strategy is right for you?

Short-Term – Saving Accounts
You can contribute to your grandchildren’s financial futures by paying into a savings account that has been opened by the child’s parents or legal guardians.
Instant access cash accounts can be beneficial if you are looking to make regular deposits. Fixed term interest accounts let you save a lump sum over an agreed period.

If a financial gift comes from a child’s parent and the interest comes to more than £100 in a tax year, tax is charged at the parent’s marginal rate of income tax. If grandparents pay directly into the grandchild’s account this does not apply.
Medium-Term – JISAs & Lifetime ISA
JISAs are one of the most tax efficient investment wrappers available. Assets within a JISA are not subject to income tax or Capital Gains Tax (CGT). They can be set up as cash JISAs or stocks and shares JISAs. While these can only be opened by a parent or legal guardian, anyone can pay into the JISA, within their annual limit of £9,000 each tax year. This is a great vehicle to help save towards your grandchild’s future. Your grandchild can take control of the asset when they reach 16, but cannot withdraw the money until they turn 18. This could provide a healthy lump sum on their 18th birthday, opening up more options as they make important decisions about their future. While they could of course spend the lot, you will have hopefully instilled some financial responsibility by this time.

Lifetime ISAs could help your grandchild save for their first home or top up their pension savings for later life. They can only be opened between the ages of 18 and 39, so while you cannot open these for your grandchildren, your grandchild could contribute up to £4,000 per year until the age of 50 and receive a 25% government bonus on top of that, up to a maximum of £1,000. Be mindful that the rules around using your Lifetime ISA savings to buy a first home are quite specific so it is best to check these before contributing.
Long-Term – Junior Self-Invested Personal Pension
This really is a long-term savings option. This could give your grandchild a substantial headstart in saving for their future. The funds in a SIPP cannot be accessed until age 55, rising to 57 in 2028, and likely to rise further in future years. However, the power of compound interest and growth in the portfolio over decades could be considerable. This could be the most valuable gift you make. You can invest up to £3,600 gross per child per tax year. HMRC will pay 20% tax relief (up to £720) so you can put in up to £2,880.

Of course, it is not just about giving your grandchildren money or other assets. Many grandparents will want to take a more active role in the financial wellbeing of their grandchildren. This could involve teaching them about finances, helping to encourage habits around budgeting and savings, and even investing when they are old enough to take an active interest. It is important to remember that not all gifts have a monetary value. The most valuable gift you can give your grandchildren is your time. Spend it well.

You can view the full tips here, but always seek professional financial advice before making any firm decisions: https://www.arbuthnotlatham.co.uk/wealth-management/wealth-planning/saving-for-grandchildren