Karen Deenihan, Senior Savings, Investments, & Funds Marketing Manager, Aviva Life & Pensions Ireland DAC

Many grandparents want to give their grandchildren a financial head start—whether it's college, a first car, getting married, or even a deposit for their first home. While a traditional bank account is a safe place to start, it may not be the best way to grow your money over time. If you're looking to make your money work harder, smarter, tax-efficient options are available.
Bank Accounts: Safe but Limited Growth
Opening a savings account in a bank is a simple and secure way to save. It's ideal for short-term goals or emergency funds. However, interest rates on deposits in Ireland are typically very low, often under 1%Footnote [1]. This means your money won't grow much over time, especially when you factor in inflation.
Want Better Growth? Consider Investment Products
If you save for long-term goals, like helping with university fees or a house deposit, investment products can offer better potential returns. Aviva offers two main options designed specifically for tax efficient children's savings:
1. Children's Savings Investment Trust (Regular Savings)
- How it works: You can save up to €3,000 per year per child (or €6,000 per couple) using the Small Gift Exemption. This does not impact the child’s lifetime Capital Acquisition Tax (‘CAT’) threshold from grandparents.
- Minimum contribution: €100 per month.
- Benefits:
- Your savings are invested, giving them the chance to grow over time.
- Investment growth is not counted as a gift for tax purposes.
- Trustees manage the funds until the child turns 18.
- You can track performance online.
This is a great option for grandparents who want to give a little each year in a tax-smart way.
2. Children's Investment Trust (Lump Sum Investment)
- A grandchild can receive up to €40,000 in gifts from all grandparents or other Group B relatives over their lifetime without paying CAT.Footnote [2] Gifts received over €40,000 are subject to CAT at 33%. Footnote [3]
- How it works: You can invest a lump sum using the lifetime CAT threshold, which allows larger gifts without an immediate charge to tax.
- Minimum investment: €10,000.
- Benefits:
- Potential for long-term growth through market investments.
- Investment growth is not treated as an additional gift.
- Trustees manage the funds until the child turns 18.
Example:
John and Mary, grandparents, want to gift their newborn grandchild €40,000, which is within the tax-free limit for grandparents' gifts, provided their grandchild hasn’t received any other gifts/inheritances under the group B CAT threshold. They invest this money in the Children’s Investment Trust. After 18 years, the investment grows to €70,000. When the grandchild turns 18, they can access this amount. The first €40,000 is tax-free, and the remaining €30,000 from the investment growth only attracts exit tax (deducted and paid to Revenue by Aviva), not CAT.
This is ideal if you want to make a one-time, meaningful contribution to your grandchild's future.
Why Use a Bare Trust?
Both of these products use a Bare Trust, which means:
- The money is held by trustees (often the parents or grandparents) until the child becomes an adult.
- The child becomes the legal owner of the funds at 18.
- Trustees can manage and switch investments as needed.
- You don't need to be related to the child to set one up.
The Bottom Line
- Bank accounts are safe but offer very low returns.
- Investment products like Aviva's trusts provide the potential for higher growth and smart tax planning.
- Using the Small Gift Exemption or CAT thresholds can help you give more without triggering tax.
- Always speak to a financial broker or tax advisor to make sure you're making the best choice for your family.