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?

I think priorities are usually education and then a decent deposit for a house. I’d be more concerned about the rising house prices and dc inability to get in the ladder as opposed to what may or may not happen in their retirement years.

I went to an event where the future of work was being discussed. The statement that “today’s young children will never know retirement” was sobering.

I’m sorted with my pension provision but need to crunch some numbers to start something for DD.

Thanks firesuit I didn’t realise that - good info! Will check that out xx

I don’t why not. The compound growth from starting at 20 compared to 30 is generally huge, so I imagine starting at 2 would be beneficial...

Oh YANBU to consider doing this

You OH is BU to completly rule it out just becasue the funds are "locked in". Sometimes having money out of sight and out of mind is useful.

We’re doing this.

What LifeBeginsAtGin said.

A tax charge isn’t a punishment Yoda.

I would recommend putting into your own pension first, particularly as you have said it isn't very big. But there is something you might want to watch out for if you do decide to put into your kids pensions.

Because of compound interest, you will almost certainly end up giving them pension pots that are over £1M by the time they retire. This means that you could end up landing them with some pretty big tax bills by the time they are middle aged.

I'm a public servant on the "new" style pensions (not the final salary ones) and I've done the maths and this will end up happening to me - it's not something that is only for the super rich. The trend of recent governments is to lower this threshold as well. It use to have no limit, but Gordon Brown introduced a 1.8m one and subsequent chancellors have lowered it in stages. Who knows what it will be in 30 years time.

I'm not saying not to invest, just that you should consider this.

Ah sorry, i took so long typing, cross posted with Yoda.

Definitely more flexible and tax efficient to max out your own pensions first. You can tax-efficiently pay in up to the lower of your full salary (including the tax top up) or £40k and give DC money when you take the pension and/or leave them the balance of the pension.

Today's children need money at the start of their adult lives, not the end of their working lives

This. I can't imagine even thinking about my children's pension tbh.

I want to give them the best start possible, give them all the tools, experiences, support to achieve the best they can. They can sort their own retirement out during their 40+ year working life. You can't plan everything for them.

We do it Op and have done for a while.

ISAs are all maxed out, but only in last 2-3 yrs due to kids getting an inheritance of their own, and DH and I getting a couple of windfalls plus inheritance from my mum. We were paying into SIPPs before that, for tax benefits.

We do pay a lot into our pensions, they aren't maxed out but we will have more than enough to live on, so makes sense to put into kids SIPPs too.

We've never had financial advise, don't trust IFAs as far as I could throw them. We just do our SIPPs alongside ISAs with Hargreaves Lansdown, and choose slightly different funds.

I just want them to have the opportunity to retire when they choose. I am 55 and getting tired, we will probably be able to go at 60, but I would be finished now if my parents had had the chance to save into a SIPP for me!!

Why is your DH so against it?

On a separate note, you say 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

If the regular savings (or any other account) has their name on it (ie not saved purely in your own name) then the money becomes theirs at 18, whatever you think. The bank or investment company writes to them as they approach their 18th and gives details of the account. In our case, the online passwords for me to access ISA/SIPP were shut off on DS 18th and he had to re register with his own. There's no such thing as hiding bank books, passwords etc as the institution tells them.

If the money is saved under your name, you will have control of it, but beware - if you divorce it is seen as your money, not theirs (whatever your intention).

I started A child Trust Fund for my son about 7 years ago. So far it has performed well. Matures when he is 18. So if he decides to go to university he will be able to cover his living costs

A 55% tax rate certainly sounds like a punishment to me.

Thanks everyone for your input. goldenhefalump as I said previously, we save for them for the ‘start’ of their adult lives already, any SIPP would be in addition to provisions we can, and already do, make in that respect as I see it as an additionally tax-efficient pot. Completely agree they will need help at the beginning of their adult lives, would just be something extra if we could also provide now for them further down the line after we are long gone.

Thanks all xx