Pension for baby?

[DoormatBob]

I was reading any article about taking out a pension (SIPP) for a baby and paying into it for 10 years. Then the compound interest can result in a very nice pension pot.

Is anyone doing this? Any thoughts please?

I was looking at around £120/month + tax relief for the first 10 years whilst DS is still relatively inexpensive to maintain!

At the same time £80/month into a JISA to remain for 18 years.

That sounds a great idea. I wish I'd thought of that when my children were young.

I’ve been thinking about doing this for my 3 Primary school age kids.

I haven’t set one up yet but have been looking at Hargreaves and Landowns website (saw it recommended on here).

I won’t be able to pay £120 per child, I was thinking of more like £25, but I think it is a very good idea to start as soon as possible.

How do you work out which is the best Junior SIPP to invest in? It is all very confusing!

I started a Junior SIPP with Hargreaves Lansdown for DD when she turned 5. I pay £30 per month into it and she gets the tax back. I find the HL platform very easy to use and have a SIPP with them myself.

I would say it's definitely worth doing as it will give more options later on, particularly if you set the retirement age at 60. But, I do look at it as relatively small supplementary savings to her Junior S&S ISA which is where uni fees / house deposit savings go and is likely to be needed before a pension!

Do you have pension provision and savings for yourself first ? What is the earliest age that you can access the pension ?

I thought you needed net relevant earnings in order to pay into a pension.

I would be reluctant to save into something which is potentially locking the money up for 55+ years. What if your child needed it earlier? I know its tax efficient but I think there are other considerations.

I have also avoided child ISAs and trusts when I realised that my DS would have sole control of the money when he was 18. I just use up my own ISA allowance and put money in my own pension. I can always give it to him later on.

I’ve been debating this but I’ve gone for a small amount in a junior stocks and shares isa instead. The tax relief seems appealing for a junior pension but the timeframe seems so long away (although I’m also uneasy about children getting access to lots of cash at 18).

I’m largely saving in my own name at the moment rather than in junior products. One day I’d expect those savings to benefit my children (particularly if it ends up going on private school in the future). I feel happier having more control of the money and the ability to draw on it if either of us lost our jobs or were too sick to work.

I won't do that. I'll concentrate my efforts on Junior ISA and other investments to help with uni costs and getting on the property ladder. Without uni debt and living in own property with 35-40+ years till retirement should make it very easy to accumulate a big pension pot.

We put £2880 pa into SIPPs for both dc, and max out their JISAs as well. It makes sense for us as DH and I also max out our pension and ISAs (DH's pension allowance is low due to his salary). We use BestInvest for the dcs, and iWeb for our own (we have a lot more money in our own, so fixed fee makes more sense).

If they need money for a house deposit/uni/wedding in future, we will still be able to help with that by taking money out of our own investments, so it's not either/or. The risk is that it might compound so much over the years that they'll risk hitting the lifetime allowance, and then not be able to take advantage of employer contributions - but we have no idea how the rules around pensions might change that far in the future. But it's tax efficient right now, and will always be money in their name, however the rules might change.

I'm keen to do this for my sons (as my parents did for me). I already have a stocks and shares ISA maxed out each year for them, but I would like to provide a longer term financial cushion as well.

Does anyone have any recommendations for ethical pensions? I would like to avoid investments in arms, tobacco, fossil fuel industries etc.

Ghislaine, if you go down he SIPP route, you can choose which companies you buy shares in. Or if you buy funds, you could choose sectors that don't involve certain types of businesses.

I would not want to lock the money away for that long with the policy change risk that comes with that.

I don't think the tax perks are great. Your kids will have 20% relief available when they are adults and could well have 40%.

I'd just invest the money in my own name and give it to them when they are older. I'd only do this if I had already exhausted all of my own tax efficient savings options. Unfortunately, I haven't.

Mine both have a SIPP with Hargreaves Lansdown, as do DH and I.

We all 4 have ISAs too, ours being fed from some lump sums/inheritence received in last 2 years, theirs from an inheritence they got just over 2yrs ago. DS already 20 so paying max 20k into his ISA, DD almost 18 so hers will ramp up to 20k after her birthday.

The ISA will be their house money, the SIPP will hopefully give them some flexibility of when to retire. I wish my parents had done similar, I would be retired now (just 55!). Might manage it at 60 still, but its amazing how much more exhausted being in your fifties makes you. If what we save now gives them the opportunity to retire once they can access the SIPP, I am sure they will be grateful.

@ghislaine our of interest do you have ethical ISA recommendations? Thanks