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Investing for children — JISAs, pensions and who controls the money at 18

Junior ISAs, child pensions, bare trusts and the £100 rule — the tax-efficient ways to build wealth for a child, and what happens when they turn 18.

Two decisions, not one

Saving for a child is really two separate decisions. The first is the familiar one: which wrapper shelters the money from tax. The second is the one nobody warns you about: who controls the money, and when. Every vehicle below answers that second question differently — from “the child, absolutely, at 18” to “nobody until they’re pushing 60” — and the right plan for most families uses more than one.

One rule before any of it: sort your own finances first. A child is better served by parents with a funded emergency fund and a healthy pension than by a full Junior ISA and parents who can’t absorb a bad year. Put your own oxygen mask on first.

Junior ISA — the workhorse

The Junior ISA is the default for good reason. Each child can receive up to £9,000 per tax year (frozen at that level until April 2031, and entirely separate from your own £20,000 ISA allowance). Growth is permanently free of income tax, dividend tax and capital gains tax, with nothing to report to HMRC — and crucially, the £100 rule below does not apply, so parents can fund it freely.

Only a parent or guardian can open one, but anyone can pay in — grandparents, aunts, godparents. It comes in cash and stocks & shares flavours, and for a horizon measured in decades the argument from the ISA guide applies with extra force: a newborn’s JISA has an 18-year runway, the strongest possible case for a cheap global index tracker over cash. Roughly £75 a month into equities from birth has historically had a good chance of reaching five figures by 18; the same into cash reliably loses to inflation.

The catch is the flip side of the tax break: the money is irrevocably the child’s. They can take over managing the account at 16, and at 18 it converts to an ordinary adult ISA in their name — to spend on university, a house deposit, or a very nice motorbike. There is no mechanism to delay, supervise or reclaim it. If that thought bothers you, the answer is not to avoid the JISA but to size it deliberately — and to read the control section below.

Born 2002–2011? Find the Child Trust Fund first

Before opening anything, check whether the child (or your now-adult child) has a Child Trust Fund — the JISA’s predecessor, opened for every child born between 1 September 2002 and 2 January 2011, often automatically by HMRC with a government voucher the family never saw.

This is not a footnote: over 750,000 matured CTFs sit unclaimed, roughly £1.6 billion, averaging around £2,200 each. If you or your child were born in that window, the GOV.UK locator tool will trace the provider from a date of birth and National Insurance number.

For a child still under 18 with a CTF, transferring it into a Junior ISA is usually a straight upgrade — CTFs tend to carry higher charges and weaker investment choices — and the transferred value doesn’t use any of the £9,000 allowance. A child can’t hold both, so the transfer closes the CTF.

The child pension — £2,880 becomes £3,600

The most tax-efficient pound you can give a child goes into a junior SIPP. Anyone can contribute up to £2,880 a year net on a child’s behalf, and HMRC adds basic-rate relief to gross it up to £3,600 — a guaranteed 25% uplift, even though the child has never paid a penny of tax. Inside, the same rules as any SIPP: tax-free growth, your choice of funds, and the fee arithmetic from the fees guide.

The compounding is absurd in the best way. £3,600 a year for 18 years is £64,800 of gross contributions; at a real 4% a year that’s roughly £95,000 at 18 — which then compounds untouched for another four decades. Plausibly the pension is largely solved before their first payslip.

And here the control question answers itself: the child takes over the account at 18 but cannot withdraw until minimum pension age — 57 from 2028, and realistically higher by the time today’s children get there. That’s the junior SIPP’s greatest strength and its whole weakness. It does nothing for university, a deposit, or anything else in the first half of their life, which is why it works as a second layer on top of accessible savings, not a substitute for them. It’s a particularly elegant vehicle for grandparents, for reasons below.

The £100 rule — the trap in ordinary accounts

Plain children’s savings accounts advertise eye-catching rates, but hide a rule that catches parents specifically. If money given by a parent earns more than £100 of interest in a year (per parent, per child), all of that interest — not just the excess — is taxed as the parent’s income, against the parent’s own personal savings allowance. At today’s rates, a few thousand pounds of parental gifts in a decent account crosses the line.

The rule does not apply to money from grandparents, other relatives or friends — their gifts use the child’s own allowances, and a child has the full set: a £12,570 personal allowance, the savings allowances and the starting rate for savings. Nor does it apply inside a Junior ISA or CTF, or to Premium Bond prizes. The practical reading: parents route serious money through the JISA and pension; ordinary accounts are for pocket money and other people’s gifts.

Premium Bonds deserve their one honest paragraph: parents and grandparents can buy them for under-16s (£25 to £50,000), prizes are tax-free so the £100 rule is irrelevant, and the expected return is mediocre but the money is safe and withdrawable — by the parent, until the child is 16. A reasonable slot for cash you might want back; not a growth engine.

Beyond £9,000 a year — bare trusts and your own name

If you want to invest more than the JISA allows, or want the money usable before 18, the standard vehicle is a bare trust — on most platforms just a general investment account “designated” for the child, no solicitor required. There’s no contribution limit, the money can be spent for the child’s benefit at any age (school fees, a first car), and gains and income are taxed as the child’s, using their £3,000 CGT exemption, £12,570 personal allowance and £500 dividend allowance — a lot of tax-free headroom. The GIA guide covers the mechanics of unwrapped investing.

Two sharp edges. The £100 rule above bites on income from parental money in a bare trust — so bare trusts shine brightest for grandparent money, where it doesn’t apply. And a bare trust doesn’t solve the control problem either: the child is absolutely entitled to the lot at 18 (16 in Scotland), and can demand it.

Which leaves the option most guides underrate: keep the money in your own name, earmarked. Your own ISA or pension headroom, mentally labelled “for Sam”. Total control — you decide when, whether and how much, and the money is still yours if your circumstances collapse. The costs are real but often worth paying: it uses your allowances, it counts for means-tested purposes, and it sits in your estate for inheritance tax. A related move once the child turns 18: they can open a Lifetime ISA, and £4,000 a year of your money through their LISA collects a 25% government bonus toward a first home.

For genuine control past 18 — larger sums, complicated families — the tool is a discretionary trust, where trustees decide who gets what and when. It works, but it brings trust tax rates, ten-year charges and paperwork, and is firmly solicitor-and-accountant territory. Know it exists; don’t DIY it.

Grandparents — the tax-favoured donors

Grandparents hold the better cards at almost every table: no £100 rule on their gifts, full use of the child’s own allowances in bare trusts and ordinary accounts, and the same right to fund JISAs, pensions and Premium Bonds as anyone else.

There’s an inheritance-tax dimension too. Gifts of up to £3,000 a year fall out of your estate immediately (plus £250 small gifts, plus the seven-year rule for larger sums) — and the underused exemption is normal expenditure out of income: regular gifts from genuinely surplus income, a monthly JISA or pension contribution being the textbook example, leave the estate immediately with no cap. With pensions entering estates for IHT from April 2027, giving earlier — into a grandchild’s tax shelters — has become materially more attractive than leaving it in the will.

So who does control the money at 18?

Laid end to end:

The fear itself is worth calibrating. Most 18-year-olds who receive a JISA they’ve watched grow do not torch it — and the best mitigation is free: involve them from the mid-teens, show them the statements, let them sit in on the annual review. A child who has watched compounding work for a decade treats the account as a machine to keep feeding, not a windfall. If a specific sum genuinely mustn’t land at 18 — it’s large, or the child is vulnerable — keep it in your name or take proper advice on a trust; don’t put it in a JISA and hope.

The one-line summary

Sort your own finances first, hunt down any Child Trust Fund, then layer: Junior ISA in a global tracker for money they’ll get at 18, £2,880-into-£3,600 a year of pension for money they’ll thank you for at 60, bare trusts or your own name for sums beyond that — and let grandparents give first, because the tax system treats their money better than yours.

Last reviewed: August 2026.