Child Pensions

[SoTiredNeedHoliday]

Hi, Where should I start looking for a provider of these? any thing I should be aware of?

Does your child have an income, have they been modelling for a clothing company, or acting?

Children generally do not have an income, so don't pay tax, so can't get tax relief. So a pension is probably not what you are looking for as an investment vehicle for most children.

What is it that you are looking for? Do you have a set amount each month you want to save for your child, how much? How long do you want that invested for, do you want your child having access to it at age 18 or later than that?

Hi Nannynick, thats actually not the case if you look up children pension. There is incentive to have one.

nannynick Everybody is a potential taxpayer, it's just that if a child doesn't have an income over the personal allowance then there isn't any tax to pay. So they are entitled to the 20% tax relief available on gross pension contributions of up to £3,600 in just the same way as anybody else under the age of 75 who has net relevant earnings below this figure.

Good to learn things, so a child can have £2880 put in this financial year and gets £3600 once tax relief is added.

Stakeholder pension - Virgin, Legal & General, Aviva could have limited fund choice but may be quite low cost, 1% cap I think.
Junior SIPP if investing monthly can often have quite a low charge, 0.3-0.4% then the fund(s) ongoing charge will be on top, so could have 0.4-0.5% overall charge if picking a low cost fund. Some providers will have a flat fee if you do not pay in monthly. Consider what may happen in the future - if your financial situation changes would your child's pension change from a low cost fee to a higher flat charge due to monthly payments no longer being made? Providers include: AJ Bell, Fidelity, Hargreaves Lansdown.

So are you going to pay £2,880 into a child's pension, to get the £3600 going into the pension, instead of paying £2,880 into your Stocks & Shares ISA on which you may get 40% tax relief (if a higher rate tax payer), which you could then gift to your child at a later date (subject to gift allowances at that time) - that way there is still the benefit of compounding but the money is more accessible. Not sure which option is better but it's something I would look at as your child may not be happy to have money locked away until their 50's.

Oh I wish there was an edit button.
No tax relief on ISA, only on pension. But the money in an ISA is more accessible so can be used earlier on.

Yes thats the point NannyNick - in some cases you may not want an 18 year old in charge of a large sum of money (18 years of isa contributions and growth).

At age 18 they have full control and you can not impact how they spend the funds, other than by suggesting how to best secure their future.
A pension on the other hand means you are contributing to the quality of their later life.
50+ year of interest and hopefully growth has to be a positive

I pay into pensions for my grandchildren and have done since they were born. HMRC adds 20% to the premium that I pay each month. So for every 80p that I pay £1 goes into their pension fund.

I have them with AVIVA but now they are not allowed to give advice. I have them invested in 3 funds, 1 UK, 1 European and 1 Global.
Currently they can access the pension at 55 although that may change.
I did this for several reasons:

1. I wish someone had done it for me
2. It is tax efficient...I have checked with HMRC
3. I did not want them accessing the money at 16 or 18 and squandering it on stuff that I squandered money on at that age.

I invest £2,880 a year for each of my dc’s too. I wish I had started earlier. I have gone down the Junior SIPP route, I would recommend one of the providers nannynick has noted, you will have much more choice of funds.

I opened a Hargreaves Lansdown Junior SIPP for DD when she was 4. I only pay a small amount each month, but it's the compounding of the interest & growth over the years that will make all the difference.

She has a stocks & shares ISA too, where financial gifts go - I would say a junior pension is a 'nice to have' if you can afford to tuck a little extra away every month. Even £24 - which gets uplifted to £30 - per month, over 14+ years will make a big difference to a retirement pot.