Try a gift of lasting value this Christmas

Gold is the oldest of seasonal gifts - but there are other alternatives, says Jenne Mannion
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The Independent Online

A stakeholder pension or a bar of gold are hardly at the top of most people's Christmas wish lists, but in terms of providing security for your loved one's future, financial-based presents could be the most sensible and lasting present to come out of their stockings on 25 December.

A stakeholder pension or a bar of gold are hardly at the top of most people's Christmas wish lists, but in terms of providing security for your loved one's future, financial-based presents could be the most sensible and lasting present to come out of their stockings on 25 December.

Churchill Insurance estimates that parents will lavish £1.8bn of toys on their children this Christmas, the equivalent of £150 per child in the UK. While there will always be a place for favourite toys, financial experts say Christmas is a good time to set aside some funds for a child's future.

Similarly, while your partner might secretly hope for romantic gifts such as jewellery or a holiday, there are plenty of ways to contribute to their financial livelihood on Christmas Day.

PREMIUM BONDS

National Savings premium bonds ( www.nsandi.co.uk) are a popular financial Christmas present and may even turn the person you give them to into a millionaire.

Instead of paying interest, premium bonds go into a monthly prize draw, with every bond having the chance to win a £1m tax-free jackpot.

There are also more than a million cash prizes, ranging from £50 to £100,000, handed out monthly. Any money you invest in premium bonds is 100 per cent secure and they can be cashed in at any time.

Anyone aged 16 or over can buy premium bonds but they can also be bought for a child under 16 by parents, guardians or grandparents.

The minimum amount you can purchase at any time is £100 and bonds are sold in multiples of £10.

BONUS BONDS

Ideal gifts for a child or grandchild are Children's Bonus Bonds, from National Savings & Investments. They offer a fixed rate of return, which is tax-free for parent and child. At the end of each five-year term, the bond earns a new interest rate for a further five years.

When the child reaches 21, a final bonus is added and the bond matures.

The bonds are available in separate issues. The current issue offers a guaranteed compound interest rate of 4.45 per cent, which includes the fifth anniversary bonus. From £25 to £3,000 can be invested in each new issue.

PENSIONS

A stakeholder pension can help ensure a loved one's future, while getting the government to pay a part of the cost.

Children or non-working spouses can hold a stakeholder pension; so, a grandparent may contribute for a grandchild, a parent for a child, or a husband for a non-working wife. The government will provide tax relief.

Ben Willis, business development manager at Chartwell Investments, Bath, gives the example of investing £2,808 net (£3,600 gross). "The government is, in effect, giving that person a further free gift of £792," he says.

FUNDS/SHARES

Paul Ilott, of Bates Investment Services, points out that children can't hold shares in their own name until they are 18. To invest for a child, you need either to designate the plan in their name or set up an absolute trust on their behalf.

Income tax treatment for trusts depends on who gifts the money. Parents need to be careful because, although their child will still be able to use their own capital gains tax allowance to help shelter gains, once the money in the trust generates income of £100 a year gross or more, all income will be taxed as belonging to the parent.

Any parent thinking of setting up an absolute trust for their child, should limit the use of income-producing investments and concentrate on those that aim to generate capital growth. "This complication doesn't exist in respect of gifts from other family members, because the child will have their own tax-free personal allowance to use up before any income is taxed," Mr Ilott says.

Jason Hollands, of F&C Asset Management, says a designated plan is different; it is held in the name of parent or grandparent, with the child's name designated. You retain control and have access to the investment before your child is 18. So, you can withdraw funds or close the plan. Income from a designated plan is taxed as yours and the investment remains part of your estate for inheritance tax purposes.

If you want to give shares, there are about 900 UK listed companies to choose from.

GOLD

While giving jewellery is a popular way to show your love for a partner, it could make better investment sense to give gold, provided you think the price will continue to rise. Gold has had a glittering performance in the recent past, reaching $457 an ounce last week, its highest level in 18 years. You can buy gold through a good trader, and a feature of investing in physical gold for investment purposes is that it is free of VAT.

Lawrence Chard, director of Chard, a Blackpool-based gold trader ( www.taxfreegold.co.uk), says there is often added interest in purchasing gold at Christmas. You can buy physical gold in the form of bars, krugerrands, sovereigns or coins. Sovereigns or nuggets start at about £40.

If you do not want to hide the yellow metal under your bed, you can invest via gold bullion shares. These can be bought through any stockbroker. Each gold bullion share is worth a tenth of an ounce of gold.

COLLECTABLES

If you know someone who collects, then a special gift with some investment potential should be on your list.

For a philatelist, filling a gap in theircollection would make them very happy on Christmas morning - although you might find it challenging to find out what they would really like without giving the game away.

However, if your gift is unusual or expensive enough that might help matters. Postage stamps are a traditional collectable, as are coins, art and silverware. Today, people seem to collect anything from old records to film posters to kitsch ornaments, perhaps thanks to the popularity of TV shows such as Antiques Roadshow and Bargain Hunt. If you choose wisely, you can be sure that your gift will be cherished and will still be worth something in a few years, and it won't be finding its way to a junk shop after Boxing Day. As always, buy from a reputable dealer if you are not familiar with the particular field.

THE LOTTERY

Instant lottery tickets start at £1 and, while the odds of winning are pitifully small, they can be a fun gift. There are Christmas scratch cards now available; if you spend £5 or more, Christmas gift envelopes are provided free. Remember that these are not investment products and become worthless after the draw, unless of course it's a winning ticket.

PHILATELY

Two Classics: A penny black for a beginner (about £50 used) or a 1929 £1 commemorative for an older hand (£650 in mint condition).

ART

How about a Julian Opie? 'Imagine You are Driving Fast'; one of an edition of 50, from the Alan Cristea gallery in London; £1,500 each, or £8,000 for a set of six.

MEMORABILIA

Interest in Beatles memorabilia and vintage die-cast toys has been very strong in recent years, so you might consider the delight that an original Corgi model inspired by the Fab Four's 1967 Yellow Submarine might deliver on Christmas morning. Slightly faulty and unboxed this one is up for auction (estimate: £40 -£50). A fine mint and boxed example might go for £400. see www.vectis.co.uk (01642 750616)

GOLD COINS

Go for proof coins and you are in the true collector's market. Alternatively you can use gold coins such as sovereigns like those pictured here (from £50 or so) as a way of owning bullion. Buy from dealers or from the Royal Mint. ( www.numis.co.uk and www.royalmint.com)

A head start for grandchildren

Michael and Sylvia Schofield, who live in Dorset, decided to give their grandchildren Jon and Alex Duncan a head start in life last Christmas.

They gave Jon, 18, and Alex, 12, lump-sum investments in the Witan Jump plan. Witan is an investment trust that holds a diversified portfolio of shares, and Jump is a bespoke trust plan for children. Although Jon, at 18, can now sell his shares and access the money, his grandfather says he plans to use it for something purposeful, such as getting through university or a deposit on a house. The Schofields chose the plan at the suggestion of their financial adviser, Chartwell Investments.

Michael, who used to run a telephone business before retiring, says this Christmas it will be back to more conventional presents, such as CD players or books.

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