There are different ways to save for your child. Children’s saving bonds used to be a way to make a lump-sum saving and receive a fixed interest rate. Our guide walks you through what they were, what’s available now and what to do if your children’s savings bond is nearing maturity.
What are children’s savings bonds?
National Savings and Investment’s (NS&I) Children’s Bonds were a 5-year bond that paid fixed interest every year. They were available for children under 16 and allowed you to invest a lump sum.
NS&I withdrew children’s bonds on 30 September 2017. However, some people may still hold a children’s savings bond that is set to mature soon.
How did children’s savings bonds work?
There were certain characteristics to children’s savings bonds, including who could open them and how much you could invest. Here’s how they worked:
Account opening. You had to be a parent, legal guardian, grandparent or great-grandparent to buy a bond for a child. The child also had to be under the age of 16.
Control. Whoever purchased the bond would have control of it until the child turned 16 or after the first 5th anniversary of the bond after the child’s 16th birthday.
Amount. You could invest between £25 and £3,000 in the bond.
Interest. Interest was fixed, so when you purchased the bond, you would know how much your savings would grow by the term’s end.
Withdrawals. If you tried to cash the bond in early, you would have to pay a penalty of the equivalent of 90 days’ interest on the amount cashed in.
Maturity. When the bond’s term was up, you could either cash it in or reinvest it for another 5 years at a new interest rate.
How to open an account for your child
Unfortunately, NS&I is no longer issuing children’s savings bonds.
When they were available, bonds had to be opened by the child’s parent, legal guardian, grandparent or great-grandparent. Bonds could be purchased through NS&I.
Are children’s savings bonds safe?
NS&I has a 100% guarantee. As a government savings bank, it has the backing of HM Treasury, which guarantees 100% of everything you invest. This included children’s savings bonds.
What are the tax rules on children’s savings accounts?
There’s usually no tax to pay on children’s accounts. If the account earns more than £100 in interest from money given by a parent, then the parent will have to pay tax on all the interest if it’s above their personal savings allowance.
Children have their own personal savings allowance, which currently stands at £12,570 for the 2024/25 tax year. If the child earns an income over their personal allowance, say from a trust, then they will have to pay the tax on this.
When children’s savings bonds were available, there was no tax to pay on the interest. If you are currently looking for a tax-free savings account for your child, JISAs allow you to save £9,000 a year tax-free.
What can I do if my children’s savings bond matures soon?
There are 3 options to choose from when your children’s savings bond matures. You can do any of the following:
Cash it in
Move the funds into an NS&I Junior ISA (you’ll need to be under 18 and not have a JISA or Child Trust Fund with another provider)
Move the funds to another NS&I account
If the child is under 16, whoever opened the bond is responsible for this. However, if the child has turned 16 during the bond’s lifetime, then the responsibility lies with them.
Alternatives to children’s savings bonds
Although children’s savings bonds are no longer available, there are plenty of options when it comes to saving for your child’s future. Here are just a few of the ways you can build up a nest egg for your child:
Fixed-rate bonds. Some providers have junior fixed-rate savings bonds. These typically allow you to save a lump sum for a fixed term with a fixed interest rate. Minimum and maximum balances would depend on the account, and they aren’t tax-free.
Premium bonds. These offer tax-free prizes up to £1 million. There is no interest earned. Instead, the bonds are entered into a monthly prize draw for tax-free prizes. You can purchase Premium Bonds from NS&I.
Stocks and shares JISA. This tax-free account lets you invest the money paid into the JISA. The money is locked away until the child turns 18, and you will not pay tax on any capital growth or dividends you receive. Just remember, as the funds are invested, your capital could be at risk.
Cash JISA. This is also a tax-free savings account. Once again, money is locked away until the child turns 18, and you won’t pay tax on the interest earnt.
Pros and cons
Pros
Fixed interest rate
Tax-free savings
100% savings guarantee through NS&I
Cons
No longer issued
Required a single lump sum
Penalties for withdrawals before the end of the term
Bottom line
Unfortunately, children’s savings bonds are no longer available. If you have a bond that is nearing maturity, then you have the option to cash it in or transfer it to another NS&I account.
For those interested in tax-free savings for their children, it would be worth exploring Junior ISAs. Here you have the option of a cash JISA or stocks and shares JISA. In both cases, funds are locked away until your child turns 18 – giving your child’s savings plenty of time to grow.
Frequently asked questions
Children’s savings bonds have now closed. However, there’s a range of other savings options available for children, including premium bonds, stocks and shares Junior ISAs and cash Junior ISAs.
Much like adult accounts, the best savings account for your child depends on your circumstances and what you are saving for. Our guide to children’s savings accounts allows you to compare all the different options.
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Kate Steere is an editor at Finder, specialising in fintech, banking and cryptocurrency. She has previously written for The Motley Fool UK and Fitch Solutions, where she covered a wide range of personal finance topics and kept a close eye on market trends. Kate has a Bachelor of Arts in Modern History from the University of East Anglia. When not working, she can usually be found curled up with a good book or heading out for a run. See full bio
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