AIBU to want to start a pension for my kids?

[Cocobab]

NC in case hubby comes on as this chat will be outing!

First this is not a stealth - it’s a genuine question before anyone jumps on me for the following post.

DH has a really lovely job he enjoys and is very well financially rewarded for. I work PT in a school and have a decent pro rata salary which I am massively thankful for as I get to work around our DCs hours in a role that is relatively well-paid.

We have been fortunate enough to max out ISAs for all of us this year, with a little left over. We’ve been really fortunate over the last ten years as we’ve benefitted (unexpectedly) from the increases in property prices. When we bought our first Home a decade ago - which we lived hand to mouth to scramble a 10% deposit for - it was an unliveable wreck, so we lived in a £300 second-hand wreck of a caravan on site for two years before we could live in the actual house, and then had another two years work before it was finished. Two years later we extended - the work was always saved hard for and only done when we could afford it and we lived frugally for a long time to get it all done. Since having DCs we wanted to relocate to be nearer family and where we could have a little more space for the kids to grow up in. In the background, property prices have absolutely rocketed, and when we sold it last year we were stunned at what it went for. Stunned. No way on earth could we ever afford anything like that if we had waited and tried to buy our family home now as opposed to buying when we did. But with that in mind, I find I worry about what our kids may face in the future when they will want to try and afford a home. I personally also don’t believe there will be anything in the way of state pension by the time they reach that age and I really find myself worrying about their long term financial security.

We save for them ‘on the quiet’- in that we have agreed we won’t tell them about this until adulthood as we want them to learn and understand the importance of saving money for themselves and how financial planning is really important (as dull as that makes us sound).

Which brings me to the AIBU (sorry, long winded) - I want to start a pension fund for them now, not specifically for us to to continually pay into but to have as an option to pay bits here and there into when we have enough ‘spare’ for example. As it’s topped up 20% by the government to me it feels like a really tax-efficient way to save money and help them along the way in the very very distant future.

However, DH is formally against it as of course, the funds are locked in. However, my feeling is if we ever needed access to cash, we have quite a healthy level of savings to which any junior SIPP investment wouldn’t really compare.

These types of conversations always seem to end up with us at loggerheads, but ultimately of course I wouldn’t invest our money unless we were in agreement, but I feel we’re really missing an opportunity.

AIBU to want to start a pension for our DCs (aged 2 and 3)?? Or am I just a boring old toad?

Firmly against it, not formally I mean

It’s a brilliant idea

Is that possible?

Dh and I are planning on living off my public sector pension, and leaving his big pension pot as a lump sum to our two dd. Is that what you mean?

I'd be more inclined to start a college fund. The rate uni fees are going at then they'd be able to provide for their own pensions.

deadwood yes, you can have a pension fund from birth - it’s called a Junior SIPP (hanged to a regular fund SIPP at 18) and any investment you make up to £2880 in any tax year is topped up by the government 20% to £3600. No interest rate on the planet would come close to that in any savings account!

avoiding DM that’s what we see their regular savings accounts for. We would use these to assist with uni or a house deposit/wedding as and when perhaps, or possibly give them a lump sum at 25 or something if there is cash leftover from the above ) I’m not expecting them to be married by 25 btw but you get what I mean)

When you see all your ISA allowances are used up, does that meaning you've already put 4K per child into Junior ISA? If not, I would do that before pension.

Does each parent already have a million pounds in their respective pension schemes? If not, are you adding the maximum allowed to each parents pension? If not, I'd extra money there, rather than to child pension. (You can leave your pension to your child, if you don't spend it all.)

firesuit yes, all ISAs are maxed (Juniors included)

We do have pensions but mine is relatively paltry to be fair - however It’s more the 20% top up that is making me think of it this way as if we invested £2880 now they will gain an addditional £720 to grow in fund.

I think it’d be wise to focus on your own pension before setting up one for your dc imo.

Are there any fees on SIPPS? (Don't know much about them).

But you get the tax top-up as well, and will get the money back much quicker, so it's a better deal to put it in your own pension.

Put your own oxygen mask on first and invest in your own pension.

Firesuit sorry, I wasn’t very clear, I’ve had my top up. Just tying to see best efficiencies etc.

If you have that much money you are better off seeing a Financial Advisor rather than asking MN.

You’re all right by the way, I should be thinking of my own pension first.... I just hate thinking of what financial world they might be living in at 65 x

That seems exceedingly generous but presumably it's not continuous. So you would only get the 20% once on each amount you put in each financial year (up to the max). The more the total amount in the pot grows the less 'APR' that would would work out as as. Or do you get interest as well?

I'm not sure what you mean by your top-up? If you're working you presumably earn more than £3600 a year, if you earn 20K you could be contributing 20K to your pension.

I'd be more inclined to start a college fund. The rate uni fees are going at then they'd be able to provide for their own pensions.

I'm already doing this. My son will need money to get him through university, buy a home, etc. By the time he comes to retirement, I'd have hoped he had made his own arrangements and he'll also have inherited our money too. Today's children need money at the start of their adult lives, not the end of their working lives.

You’re all right by the way, I should be thinking of my own pension first

Don't forget that your pension can be left to them. And if you die before 75 it will be completely tax-free, so from a tax point of view it's potentially better for them than funding their pension!

If you withdraw the money and give it to them once you are 55, they could get it sooner than if you had put it in their pension.

Better to seek financial advice from a financial advisor than aibu, I think?

Firesuit I went back to work three months ago (have been SAHM since first DC was born and only contributed the 2880 per year from Household income) and prior to that I had made my 2880 contribution to my personal SIPP for this tax year. Does that make sense or have I missed a trick?

Guys, just to clarify, I’m not asking financial advice for those of who who have commented this isn’t the place (pecanpickles and lifebeginsatgin)- I’m asking if AIBU to want to start a pension for my kids as DH suggests I am. That’s a different question entirely.

Why don't you do the math in Excel, calculate on interest on interest, see how different alternatives fall out. The top up at such an early age seems interesting, and then interest on interest on that amount for a good number of years. The college fund could be an alternative, or why not do both. I never needed a college fund myself, education was (is) free where I am (bill picked up over the taxes).

I don't think it would make sense to put money in a child SIPP if there was any scope to put it in a parent pension instead.

If you've earned more than 3600 in the there months you've worked you may be able to put more in.

If your husband's total contributions (employer and employee) are less than 40K and he has contributed less than 100% of his salary, he could put more in to his. (If he is able to contribute more via salary sacrifice, that would be the best way to do it, as the tax relief is greater.)

Thanks mixture that’s where my head is at - the ‘free’ top to grow over 65+ (probably years) is quite compelling. But you’re right I need to do more maths x