Giving Grandparents

You might fantasise about running off to the Bahamas and leaving the little blighters to sort it out for themselves. And you’ve earned that right! But most grandparents we talk to want to help their families with property, school fees or tuition fees. And we’re all united in wanting to leave as much as we can to our children and as little as we can to the insatiable taxman. Inheritance tax is more complex than ever so we’ll have a quick whizz through that, as well as checking in on Junior ISAs and your own pension too.

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Inheritance tax - less for HMRC and more for the family. Your own pension and maxing that. Saving for the grandkids. 

1Inheritance Tax - don't pay more than you need to

What's it all about?

The only two certainties are death and taxes and the hated inheritance tax lumps these both together.  More complex than ever, we can now each leave £325,000 tax-free, rising to £425,000 if that includes your family home.

Your spouse or civil partner doesn’t pay inheritance tax on the assets you leave them. If you leave a pension and die before you’re 75 – that’s tax free too. After 75 – your heir pays tax on this at their income tax rate. Do sort your will out if you haven’t – it can help plan around any unnecessary inheritance tax.

Key facts

  • Married couples can leave £850,000 tax-free including home
  • After that your kids will pay 40% tax - read up about trusts
  • You can gift things away - but 7 years before you die

Read

Our 2-page factsheet has more details, numbers and some case studies. You could also consider seeing a financial adviser or a tax adviser just to run through things. An hour with a financial adviser will typically cost about £150 - £250. Have a look at VouchedFor or Unbiased.

Listen

Holly and Georgie discuss finance for Giving Grandparents in this audio guide.

2My pension - how to look after it

What's it all about?

New(ish) pension freedoms mean you can take money from your pension when you are 55 now. You get a 25% chunk tax-free. And you don’t have to buy an annuity any more.  If you want you can go into drawdown which means you still have ‘skin’ in the stock market and your money is still invested- and you just take out the income you need every year. The tricky thing here is not running out of money too soon.

The independent Government-backed Money Advice Service has a useful tool which will take your pensions saving, chuck in some background facts and give you an annuity quote - takes 10 minutes. Please don't just politely stay with the pension company you've always been with! Shopping around can literally make you thousands.

If you have a final salary scheme be really careful before moving it or fiddling. Some of these guarantees are like hen’s teeth these days and you will be worse off if you move it.

Key facts

  • 55 today? Your state pension age is 67
  • £100,000 typically buys an annuity of approx £4,000 (health dependant)
  • Get a quick quote from the Money Advice Service

Choose

Have a look at which online pensions we rate.

Read

Our 4-page guide to retirement income makes understanding your pension figures a lot easier. You're welcome.

Watch

In this quick video, Holly talks about why you need a pension, and how to get free money from the Government.

3Junior ISAs - a great headstart

What's it all about?

Although these savings accounts need to be set up by parents, once done, grandparents can contribute directly. You can pay up to £4,128 a year into these largely tax-free accounts and build up a nest egg for the grandkids. Even if you’re hesitant about the stock market, over 18 years history tells us that you are 99% more likely to do better in shares than cash. Our Best Buys will show you which providers can give you a steer and manage these investments for you.

Key facts

  • The money is locked away 'till they are 18
  • You can invest the money in shares, not just cash
  • Save up to £4,128 per grandchild every year

Choose

From our list of wonderful Junior ISA best buys.

Read

Our 3-page guide on these great tax-free savings account for children. 

Listen

Holly talks to Giving Grandparent Susan about investing for an income.

Watch

Holly explain what Junior ISAs are and why they're great investments for your Little Nippers in under 1 minute.

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