Child Tax Exempt Savings Plan
A helping hand
For your children
It’s hard to imagine our children being fully grown adults. When the little ones become big ones. It seems like such a long way away, doesn’t it? But it’ll be here before we know it. Our Child Tax Exempt Savings Plan is a great way for you to give them some financial support for the adult years ahead.
This affordable plan offers a guaranteed tax-free cash sum when they need help the most. Imagine helping them buy their first car, paying towards university fees, or even helping with a deposit on a property. What a wonderful feeling to play such an important part in their lives.
Why choose the Child Tax Exempt Savings Plan?
Affordable saving for your child’s future at just £25 a month.
Available for children aged 0 to 15. But don’t worry if you have a child over 16. We offer an adult Tax Exempt Savings Plan as well.
Can be held alongside a Junior ISA or Child Trust Fund.
The money you save is invested in our top performing With Profits fund and has the potential to grow thanks to the addition of annual and final bonuses. (Source: Barnett Waddingham Survey Dec 2018)
Choose how long you want to save for from 10 to 25 years. You can even select the exact day – we find birthdays are very popular! Your child must be at least 16 years old to receive the cash sum.
As a Foresters member your child or grandchild has access to Foresters Extras which includes discretionary grants to help cover the cost of things like higher education and healthcare costs.
Laura about her daughter Ruby
“I chose the Foresters Friendly Society Child Tax Exempt Savings Plan for my daughter, Ruby, because it’s an affordable amount to save for her each month with excellent member benefits in addition to the policy. Ruby has been a policyholder for 7 years now and I took the Child Tax Exempt Savings Plan out on her behalf shortly after joining the Foresters Member Services department. I love the fact that I was able to choose how long I wanted to save for. I’ve chosen her 21st birthday as the date she will receive the cash from the policy, so that I am able to give her a special gift on this special day. I think the most attractive member benefit for us in the future will be the educational award, which could help her when she goes in to further education.”
A real-life example
A £25 per month Child Tax Exempt Savings Plan which commenced in November 2008 with a 10 year term provided a payout of £3,438.78 at maturity. This is an average annual return of 2.7% and a total return of 14.6%, after charges.
Past performance should not be seen as a reliable indicator of future results and the addition of annual and final bonuses is not guaranteed.
- Following a re-price, all TESPs taken out from 1st January 2018 will have a guarantee of 91% of contributions. This change to the guaranteed amount does not impact future investment performance of your child’s plan, but does mean the amount your child receives at the end of the plan could be lower than the contributions made.
- The final bonus rate is based on the year that the policy commenced and can change at any time.
- The above graph is provided for information purposes. The potential for future bonuses depends on the performance of the Order Insurance Fund and how we distribute any profit.
Ready to start saving for your child’s future? Apply today!
Added value for your child – Foresters Extras
Taking out a Child Tax Exempt Savings Plan means your child is part of the Foresters Friendly Family, and can enjoy some wonderful, unique benefits including discretionary grants to help with the cost of higher education and to support life’s ups or downs.
Who can open a Child Tax Exempt Savings Plan?
Anyone can open a Child Tax Exempt Savings Plan. If you are not the child’s parent or guardian, we’ll ask you to confirm that they agree to you setting up the plan. We will then send the plan documents to them so you will need to provide their details as part of the application process.
If the person paying into the plan isn’t the parent or guardian, they’ll receive a copy of the Direct Debit agreement to show they are paying the contributions. They’ll also receive the right to cancel pack in the first 30 days.
Can I open more than one Child Tax Exempt Savings Plan for my child?
In a word, no. You see, under current legislation each person (including children) can save up to a maximum of £25 a month in a Friendly Society tax free regular savings plan. And because monthly contributions for this plan are fixed at £25, you can’t hold more than one plan.
However, any contributions above these limits can be invested in our other savings plans.
What is the guarantee?
Good question. As long as you keep paying in the monthly contributions for the full term, your child is guaranteed a minimum cash lump sum at the end of the term of 91% of the contributions paid.
And, whilst not guaranteed, there’s the potential for bonuses to increase the amount your child receives. Once added to their plan, a bonus cannot be taken away and will become part of the guaranteed value, subject to all monthly contributions being paid. That’s not a bad start to adulthood!
As further protection for you, we’re covered by the Financial Services Compensation Scheme. This means that in the unlikely event that we could not honour the guarantee (i.e. if we were declared insolvent), you may be entitled to make a claim on the Scheme.
Are there any charges?
As with any investment, there are costs in running the fund. These include the costs of buying and selling assets. We deduct charges upfront before we declare bonuses. So there are no additional charges for you to pay. For more information about charges, see the Child Tax Exempt Savings Plan Key Information Document and Important Information.
Where is the money invested?
All the money you pay into the Child Tax Exempt Savings Plan is invested in Foresters Friendly Society’s top performing with profits Order Insurance Fund. To keep the risk down, we spread all the money paid into our fund across a number of different types of assets. These may include stocks & shares, property, government bonds and cash. If the return from any one particular asset type is poor, the fund may be protected from the full impact of this fall as other assets may perform better.
Please see the Principles and Practices of Financial Management (PPFM) for the latest information on our investment strategy.
What interest does the plan pay?
The Child Tax Exempt Savings Plan doesn’t pay interest. Instead, by investing the money you pay into the plan into our with profits Order Insurance Fund we provide the potential for growth by way of bonuses. The better the fund does, the higher the bonuses you could potentially receive. Any profits generated by our fund are used to add an annual bonus to your child’s guaranteed sum and possibly a final bonus when the plan reaches the end of its term.
Since 2010 the following annual bonus rates have been declared for the Child Tax Exempt Savings Plan:
- 0.25% of the guaranteed maturity amount and 0.75% of previous bonuses
The guaranteed maturity amount is 91% of the total amount you will pay into the plan when it reaches maturity and is the guaranteed minimum amount you will receive. This is subject to you paying all your monthly contributions into the plan for its full term.
For example if you are saving £25 for 18 years, the guaranteed maturity amount for your plan is £4,914. So each year, if a bonus is declared it will be calculated on the total £4,914 instead of your total contributions for that year (£300).
Additionally, if your plan has had a total of £70 in bonuses declared previously, for example, this amount may receive a bonus too which all adds to the total value of the plan.
The addition of any bonuses is not guaranteed. To find out more about the addition of bonuses and how we manage our fund please read our Principles and Practices of Financial Management (PPFM).
We may vary the design of a product to best meet the needs of our policyholders which may affect the timing and size of future bonuses. Therefore the above table is provided for information purposes only and should not be considered an indication of likely future performance.
Can withdrawals be made from the plan?
No, we’re afraid not. Child Tax Exempt Savings Plans like this one are a fixed term regular saving plan so withdrawals are not possible until the plan matures. It’s all about playing the long game.
What happens if I stop paying?
We’d urge you to keep up payments. But if you have to stop during the first year, the plan will lapse with no value and we’re afraid we won’t be able to refund your money. After the first year, if the plan is cashed in or you stop making payments, the child may get back less than you have paid in. Any payouts made due to the surrender or cashing in of this plan will be paid to the child, as this plan is for their benefit.
What happens if either myself, or the child, passes away during the plan’s term?
If the child passes away, a refund of contributions paid to date will be payable to their estate.
If you pass away while paying contributions on behalf of a child, someone else may continue to pay the contributions so the plan can continue to its maturity date. If there is no one to continue paying into the plan, the guaranteed maturity amount will be reduced and will remain invested until the maturity date when the plan’s value will be paid to the child. During this time, the plan will continue to benefit from any annual bonuses which will be paid on the reduced guaranteed maturity amount.
What happens when my child’s plan reaches maturity?
We’ll send the child a maturity information pack a little while before the plan is due to mature. This will advise how much the cash lump sum payment will be, and will detail the information we’ll require so we can transfer the money to them. If the maturity date is set for the child’s 16th birthday, the maturity information pack will be sent to the parent/guardian.
When the plan matures all of the money saved and all bonuses will be paid directly to your child. So that we can do this, your child will need a bank account set up in their name.
I’m not sure if the Child Tax Exempt Savings Plan is right for me. What should I do?
If you’re unsure as to the suitability of this product you should seek advice from a Financial Adviser. Of course, you may have to pay for this advice.
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We’re here if you need help or have any questions
If you’re a little stuck and need help, please get in touch. Our UK based team can help to make things as smooth and easy as possible (lines are open Monday to Friday 9 am to 5 pm).