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It's tax-free investing using your child's tax exempt savings allowance exclusively available to friendly societies.
What is it for?
It's a fixed-term investment which could provide your child with a tax-free lump sum to help them take their first footsteps into adult life.
At a glance
The Child Bond is a tax exempt savings plan which offers tax-free growth potential.
Start from an affordable £10 to £25 a month.
Your child will receive a guaranteed minimum cash sum after either 10 years of investing, or on their 18th or 21st birthday.
Available to children aged under 16 who are resident in the UK.
Remember the value of investments can go down as well as up, and your child could get back less than you've paid in. If you cash in within the first two years your child will get nothing back.
Tax-free means the funds grow free from tax, with the exception of tax we've already paid on your behalf (such as on dividends from UK shares).
How it works
Read on to find out more about how our Child Bond works and consider whether an Investment Bond is right for your child.
The Child Bond is a tax exempt savings plan which invests your money for a fixed period of either 10 years or until the child's 18th or 21st birthday.
As with all investments, it's important to be aware that the value can go down as well as up, so your child could get back less than you've paid in. If you cash in within the first two years your child will get nothing back.
A small amount of life cover for the child is automatically included.
The bond is the property of the child at all times.
About tax exempt savings plans
Tax treatment depends on individual circumstances. Tax law may change in the future.
Tax-free means the plan grows free of income or capital gains tax (other than tax that's already paid i.e. on dividends from UK shares).
The cost of life cover is included as a small part of the plan’s charges. The cost of life cover is higher for older ages.
You can only invest a total of £3,600 each year in a qualifying endowment life policy, including up to £25 a month in a tax exempt savings plan.
From between £10 and £25 a month, you could start a Child Bond with Scottish Friendly. You can also make payments on an annual basis if you'd prefer from £120 to £270 every year.
Payments are made by Direct Debit, so once set up you may hardly notice them leaving your account.
The Child Bond is a fixed term investment which runs for a minimum of 10 years, however you can select to invest for longer, until the child’s 18th or 21st birthday.
The Child Bond is the property of the child and you can be sure they’ll appreciate the extra money when they’re older.
In addition to your child's Junior ISA allowance
If you've already used up their Junior ISA allowance for the current tax year don't worry! The Child Bond lets you make use of a special tax allowance available to friendly societies - like Scottish Friendly.
Read more about tax and tax exempt savings plans in the important things to think about tab.
Life cover comes as standard
As a condition of the tax benefits, with the Child Bond you also get life insurance for the child. This ensures that on death the child’s estate will receive at least the guaranteed minimum cash sum plus any locked in bonuses. You should consider if this is appropriate for the child’s financial needs. The level of cover depends on their age and your payments into the Child Bond.
Unlike a traditional savings account, you don't earn interest on the money you pay in.
Instead, a Child Bond puts your money to work in our With-Profits fund which invests in a range of assets which includes shares, bonds, property and cash.
The 'What could my child get back?' section below provides an additional example of what you could get back in the future based on a payment amount which is lower than that shown in the KID.
A guaranteed minimum cash sum
What’s special about the Child Bond is the guaranteed minimum cash sum your child will receive at the end of the fixed term. This gives you the reassurance of knowing that part of their total investment is protected.
The guaranteed minimum cash sum will depend on the child's age and how much you pay each month. At first it will be less than the money you’ve paid in but it’s designed to increase through the addition of bonuses.
Long-term growth potential in the Child Bond comes from the addition of regular bonuses and a potential final bonus. The value of these bonuses is based on the profit we make, our investment returns and the way in which we distribute these to our customers and bonuses are not guaranteed.
Because your investment is linked to a range of assets it’s impossible to tell you the exact return your child may get in the future - but we can give you a rough idea.
The chart below provides examples of what you could get back in the future based on a payment amount which is lower than that shown in the Key Information Document.
Projected returns on £25 per month invested over 10 and 15 years*
Projected returns for illustration only. Remember your original investment is not guaranteed and the child could get back less than the amounts shown.
You can see in the illustrations above that the lower projected growth rate of 2% a year provide returns which are less than the total paid in over a 10 and 15-year term. This is due to the effect of charges in the first two years and cost of life cover for the duration of the bond.
* Based on a child aged 6 next birthday. Total amount invested over 10 years is £3,000 and over 15 years is £4,500. Based on current tax law, which may change.
These figures are only examples and are not guaranteed. They are based on premiums being paid for the full 10 or 15 years. They are not minimum or maximum amounts. The guaranteed minimum cash sum depends on your premium and the duration of the bond. What the child gets back depends on how the investment grows and on the tax treatment of the investment. Do not forget that inflation would reduce what the child could buy in the future with the amounts shown. (For more details on the effect of charges on the bond, please see the Product Guide).
The annual rates of growth for the illustration have been based on our reasonable estimate of potential returns and are subject to the maximum projection rates permissible by the Financial Conduct Authority. All the figures include the deduction of the actual charges assumed on the bond. These charges may vary in future. Figures are only examples and the projected benefits are not guaranteed.
Each year we will send you a statement showing the bond's current value.
When you take out a Child Bond we’ll send you a welcome gift - a £25 My Rewards gift card. You can redeem your card at numerous outlets throughout the UK including The Apple Store, John Lewis and Love2shop.
We will send your My Rewards card within 28 days of receiving your first payment. Once registered you will be able to access the full list of retailers.
Member benefits
Once you have applied, if you sign up to the My Plans online service and opt to go paperless, we’ll send you a My Benefits card.
My Benefits gives you access to fantastic savings and offers from thousands of leading brands and local outlets. This includes offers on eating out, leisure, travel and holidays, household goods, gym membership, DIY and electricals from a range of retailers.
Being part of a mutual
Scottish Friendly is a mutual - this means we don’t have shareholders, which also means any profits are used to benefit our members.
Knowing you’re protected
Your money is protected by the Financial Services Compensation Scheme. Full details of the level of protection can be found in the Product Guide document. If you want to know more about the scheme itself, we've more information to help.
Starting your plan with Scottish Friendly is safe, easy and you can complete your application online today. Once you're comfortable with the way our Child Bond works, make sure you've read the Product Guide and Key Information Document and then you can apply online.
Scottish Friendly doesn't provide advice. The information provided should help you decide if the plan is suitable for you and your child. If you're not sure whether this plan is suitable, you should contact an independent financial adviser for advice. Advisers may charge for providing such advice and should confirm any cost beforehand.
Before you apply for a Child Bond
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1. Make sure you have read and understood the information provided on our Child Bond.
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2. Download and carefully read the Key Information Document and Product Guide. This is our standard client agreement and you should read these terms carefully for your own benefit.
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3. If there's anything you don't understand, we're here to help. Call us on 0333 323 5433. Lines are open 8.30 am - 5.30 pm, Monday to Friday. Calls may be recorded and monitored.
