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Designated Account or Bare Trust

Designated account or bare trust 

Children’s investment plans offered by investment managers usually offer the choice of using a designated account or a bare trust when investing for a child. The rules and tax treatment of these two options are quite different, so let’s take a closer look…

  Designated Account Bare Trust
Option Open a Children’s Savings Plan in your own name or that of another adult.
Set up a Bare Trust (this includes the appointment of between two and four trustees, which can include yourself, your partner, a trusted friend or relation, or a professional adviser)*. 
What this means The plan will be held in your name (or that of another adult) with the child’s name or initials designated on the application form.
A Bare Trust will be set up in your child’s name. The trustees you appoint will have administrative control until the child reaches 18 or older, when control should be passed to the child**.
Advantages Access can be gained to the investment at any time to pay for unexpected costs.
The investment may not form part of your estate for inheritance tax purposes – however, professional tax advice should be sought.
Disadvantages The investment will be part of the estate of the person who holds the plan. It will be included in his or her total assets for inheritance tax purposes.
Once set up, a Bare Trust cannot be revoked and you will have no legal entitlement to the proceeds or income from your investment. There is power given to the trustees to apply funds for the child’s benefit either directly or via the parent or guardian. The trustees can change the investments so long as they deal with them on behalf of the child.
Consider this option if You may require access to the investment before the child is 18, for example, to pay for school fees or general expenditure.
You want your child to have access to the investment after they are 18** but not before.

* A Bare Trust cannot be opened via our Online Management Service.  A Bare Trust application form must be completed.

** Please note: in Scotland this is age 16; please consult your tax adviser on this point.

For more information request a copy of our Children's Savings Plan Application Pack.

Request an Application Pack

The Children's Savings Plan Application Pack contains all the information and application forms you need to invest.

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