It can be hard for grandparents living in the UK, when close family members have moved overseas.
While they miss the everyday contact, many grandparents will want to do their best by their little ones, by saving money for their future.
This is fairly straightforward if they still have bank accounts or savings plans in their names in the UK, but trickier if you have to transfer money overseas. Here are you options.
UK bank account
If your grandchildren have only recently moved abroad, and still have UK bank accounts set up before they left, they can keep these open and family members can continue to make regular monthly transfers and one-off lump sums as before.
That is the simplest way to save for your far-flung grandchildren, particularly if they are likely to come back to the UK at some point, either temporarily or permanently, and can therefore access the money without ever having to send it overseas.
So your decision will be easier if you have an idea of their future whereabouts. It will be easier still if you expect them to return before age 18, which is when the money you save starts to come in useful.
If you expect the children to go to university, or find a job in the UK, you could build up a nest egg for their return.
That would also give them a nice treat when they come back “home”.
If your grandchildren had a tax-efficient children savings vehicle in the name before they left the UK, such as the Junior ISA or its predecessor, the Child Trust Fund (CTF), you can continue to contribute while they are resident overseas.
Family and friends can pay in up to £9,000 in the 2020/21 tax year, either to the Junior Isa and CTF, and this contribution ceiling may increase in future years, so check out the annual maximum.
The big advantage of Junior ISAs and CTFs is that the money rolls up free of UK income tax and capital gains tax. The child can take control of it from age 16, and is free to make withdrawals once they turn 18.
At that point, the money will automatically rollover into an adult ISA, and they will maintain the tax benefits for as long as the money sits in the account.
If they remain overseas after age 18, you cannot contribute to an adult ISA on their behalf.
Money held in a Junior ISA or CTF may be free of tax in the UK, but that does not mean it will escape tax overseas. Many countries will tax residents on their worldwide savings and assets, and may not respect the Isa structure.
This is less of a problem when your grandchildren are young, as they may not pay tax at all, but it could be an issue later.
It is worth checking with the parents before you start saving in your grandchild's name, in case there are any foreign tax implications.
If your grandchildren do not have a Junior Isa, their parents can only set one up while abroad if one of them is a crown employee serving overseas, such as a diplomat or member of the armed forces.
National Savings & Investments
As a grandparent, you can buy Premium Bonds on behalf of grandchildren, and this may apply even if they are resident overseas.
You will have to buy them by post, though. Before parting with your money, check it is legal to hold Premium Bonds where they live, for example, strict gaming and lottery laws in the US could cause problems.
You will need to nominate one of the child's parents or guardians to look after the bonds until the child turns 16. They may also need to send proof of the children’s identity and address.
Find out more by calling National Savings and Investments accounts (NS&I), which issues Premium Bonds, on 08085 007 007.
Save under your name
If your grandchildren haven't got any UK-based accounts in their names, the situation becomes more complex.
Due to fraud and anti-money-laundering rules, it is almost impossible to set up a UK account in the name of a third party who is not currently a resident in the country. This means you will struggle to set up bank accounts in your grandchildren's names.
A get-round might be to set up a UK savings account in your own name, and making a mental note that the money actually belongs to your grandchildren.
Some grandparents like the idea of opening a ‘secret’ account to build a nest egg for their grandchildren, say, to surprise them on their 18th birthday.
Others do it because they do not trust the children's parents as custodians of the money, especially if they fear the relationship might break up.
Just make sure that somebody knows about your secret account, otherwise the money could get lost if you die without telling anyone it exists. You should also set this out in your Will, as a bequest.
While you may wish to keep the account secret from family, remember to declare it to the tax authorities, where appropriate.
Send money overseas
If you want to send regular sums to your grandchildren now and they don't have a UK account, things get more complicated, and if you're not careful, pricey.
You could ask the parents to open a savings account locally, and then make one-off or regular contributions.
The question you then face is how to transfer the money. Sending cheques is cumbersome, these days, and many banks charge £20 or more to cash in an overseas cheque, so ask before you send one.
International bank transfers can also be expensive, you could be charged anything between £5 and £25, depending on your bank. Many banks also have uncompetitive exchange rates, which could take a further cut of the money you transfer, so keep an eye on those.
Specialist international currency transfer services typically have lower fees, but can still be expensive if sending small amounts.
Otherwise check out the new breed of mobile banking apps, some of which allow you to switch money overseas at spot currency rates, with minimal charges.
If your grandchildren or their parents can download the same app, that could save everyone a lot of expense and trouble.
Do your research carefully, and you might save an awful lot in charges, which means your grandchild gets to keep more of the money you send.
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