Saving for children and grandchildren: Junior ISAs, pensions and trusts
Money put aside for a child can grow for 18 years or more, so the account you choose matters. The main differences are who controls the money, when the child can reach it and how the income is taxed.
By Vince De Stefano, Head of Financial Services
Updated 26 October 2026
4 min read
Key takeaways
- A Junior ISA takes up to £9,000 a year, grows tax-free and belongs to the child at 18.
- A child's pension takes up to £2,880 a year in total, which tax relief tops up to £3,600, but it cannot be reached until pension age.
- Income over £100 a year from a parent's gift to their own child is taxed on the parent. Gifts from grandparents are not caught.
- A discretionary trust keeps control with the trustees beyond 18, but has its own tax rules.
Junior ISAs
Any UK-resident child under 18 can have a Junior ISA, in cash or stocks and shares. A child who has a Child Trust Fund must transfer it into a Junior ISA first. Parents open the account, and anyone can pay in, up to a combined £9,000 per tax year. Interest, dividends and gains are tax-free, and the parent's £100 income rule does not apply.
The child can manage the account from 16 and takes full control at 18, when it becomes an adult ISA. There is no way to delay access or restrict how the money is used, which is the main reason families with larger sums look at trusts.
Pensions for children
Parents, grandparents and others can pay up to £2,880 a year in total into a personal pension for a child, and the government adds basic-rate tax relief to make £3,600. The money is invested for decades, but it cannot be reached until the minimum pension age, which will be at least 57. A pension suits families who want to give a child a head start on retirement rather than money for university or a first home.
Talk to us about your position
Book a no-obligation consultation with the Totus One team.
The £100 rule for parents
If a parent gives money to their own child under 18, and the money produces more than £100 of income in a tax year, all of that income is taxed as the parent's. Each parent has a separate £100 limit. The rule exists to stop parents moving income into their children's names to use their personal allowances.
It does not apply to gifts from grandparents, other relatives or friends, to money held in a Junior ISA or child's pension, or to gains as opposed to income.
Bare trusts and discretionary trusts
- Bare trust. Trustees hold the assets for the child, who is the beneficial owner and in England and Wales can take them at 18. Income is taxed as the child's, unless the £100 parental rule applies. A gift into a bare trust is a potentially exempt transfer for inheritance tax.
- Discretionary trust. The trustees decide which beneficiaries receive income and capital, and when. This keeps control beyond 18 and can cover several grandchildren, including those not yet born. Gifts in are chargeable lifetime transfers, and the trust has its own income tax, capital gains tax and ten-year charges. See trusts and tax.
Other options
- Premium Bonds can be bought for a child by parents and grandparents. Prizes are tax-free.
- Children's savings accounts are simple for smaller sums. Watch the £100 rule if parents are paying in.
- Lifetime ISA. Between 18 and 39, a young adult can open a Lifetime ISA and receive a 25% government bonus towards a first home. Gifts from family can fund it. The government has consulted on replacing it with a First Time Buyer ISA, and Lifetime ISAs remain available until that launches.
Regular gifts into a Junior ISA or pension for a grandchild can fall within the £3,000 annual exemption or the exemption for gifts from surplus income. See gifting to children.
Frequently asked questions
How much can I pay into a Junior ISA?
Up to £9,000 per child per tax year in total, from all contributors.
When can a child access a Junior ISA?
At 18, when it becomes an adult ISA in their name. They can manage it from 16.
Can grandparents save for grandchildren without the £100 rule applying?
Yes. The £100 rule only applies to gifts from a parent to their own child.
Can I stop my child having the money at 18?
Not with a Junior ISA or a bare trust. A discretionary trust lets trustees decide when beneficiaries receive money.
Sources & further reading
The value of investments and the income from them can fall as well as rise, and you may get back less than you invest. Tax treatment depends on your circumstances and may change.
This article is general information, not advice. Tax, financial and legal rules change and their effect depends on your circumstances. Check the current position and take professional advice before acting. Last reviewed 26 October 2026. Totus One Limited (company no. 16855798).
An independent financial planner advising individuals and families on pensions, investments, protection and inheritance.
The Totus One brief
One email a month on tax, wealth and law for private clients.
By subscribing you agree to our privacy notice.