Should I split up funds in my ISA for different goals?
01 December 2021
Question by Graham
My wife and I have ISA platforms with Vanguard and Hargreaves Lansdown respectively. The Vanguard is used as a long term investment vehicle for grandchildren with a small amount every month. My HL is quite large and I will use all of 20k ISA allowance. I now have the problem that a number of lump sums have come in and I need the £20k ISA allowance on my wife's account but I want to keep the grandchildren's bit separate. I guess I could just invest in a single fund for the grandchildren in the Vanguard account and invest in a different fund for our lump sums. Are there any other options?
Answered by Boring Money
Thanks for your question. It is great that you are making the most of your ISA allowances already.
You have some different options available to you:
- Junior ISA's - As a Grandparent you can't open these as it has to be done by their parents/guardian. You could however gift the money to your children who could then use this money to open a Junior ISA for your Grandchildren. There is a £9,000 limit on these per tax year. These ISA's would be in the Grandchildren's name and at age 16 they can then take over control of these ISA's. Then at age 18 they can take money out of this ISA. It automatically turns into an adult ISA at age 18.
- General Investment Account (GIA) - These do not benefit from the same tax efficiency of an ISA. However it allows your money to continue to be invested in the same way that your ISA is. So you could invest the lump sums into a GIA for your wife.
- Pension Contributions - It is difficult to comment on this as I do not know your situation (whether you are working, your income, current pensions etc). Even when you are retired and have no salary you can still make pension contributions of £3,600 gross per year. You would only have to pay in £2,880 and the government would add in £720 of tax relief to make it up to £3,600. This is an extremely tax efficient way to invest.
There are more options available but difficult to comment without knowing more about your situation. If you are considering any of these options I would recommend getting advice on this to make sure you are making the right decision.
If you have any questions then please message me and I would be happy to help.
Independent Financial Adviser