Children’s pensions

[CandyCanes23]

Please help me workout if I’ve set this up fairly, I can’t get my head round it!

I have set up a pension pot for each of my DS. One is nearly 7, the other was born in January.

My understanding of pensions is that you should save half your age as a percentage of income. So if I take the current graduate income to be £30,000 pa, I save 3% of £30,000 on a weekly basis (£17.07 - he wasn’t quite 6 when I set it up) for DS1, and 0.5% for DS2, set up when he was born (£2.88 a week).

However the difference between what I’ll have given them by the time they are 18 is about £10,000.

Their other savings are identical, and increase each year, so DS2 will receive more by the time he is 18 (around £8,000 more).

Am I being fair or not?

It's not a rule you have to stick to. Just adjust the percentages so that they'll both end up with the same at 18.

No, you should aim to give them about the same at 18, with potentially some adjustment for inflation. Over 7 years, I don't think an 8k adjustment reasonable.

It's not clear how much you can afford to contribute, but amounts like £3 per week are meaningless. The percentages yo mention are rather vague guidelines, not supported by any solid analysis, and certainly inapplicable to young children.

I suggest you work backwards from the maximum SIPP amount you can contribute, which is £3,600 per year, a net of £2,808 after the automatic tax credit provided by HMRC.

They will not be able to withdraw their SIPPS unit they are about 60, so the bulk of the benefit will be investing the money carefully, for long term growth. Have yo taken advice ?

It's beyond me why u want to invest in pension for a child when they can't get at it until old age.
They are more likely to need this for studies, homes, education, cars etc well before that?

That's brilliant that you're doing this now OP. I wish I'd done the same when my children were small. Being able to gift them a significant contribution to the costs of their retirement is an amazing thing, and the years of compounding will do much of that for you - however much you can contribute.

Thank you. I don’t have lots to invest, I just wanted to make a start so that they have something to build on. I haven’t taken advice, but am spreading the investments across different pots under the same SIPP, so hopefully that will help.

I’m putting small amounts aside for them in other places. They have ISAs which will mature at 18, and Premium Bonds we can access before then if needed. But I wish I’d started a pension earlier, so it’s something I’d like to make sure they have started and invest in from day 1.

Thank you. I’d rather put small amounts away now and let it grow. It’s better than nothing. I wish I’d started my pension earlier!

Sounds like a great idea. As planning to do similar but at 18. Who have you set their Sipps up with? Thanks 🙏

DDs SIPP is with AJ Bell. There isn't loads in it but I like the fact that when I'm gone, or at least in my 80s I'll still be able to 'treat' DD and makie her life easier.

I’ve gone with Fidelity. Found their website easy to use, and a walk-through approach to choosing a fund, because honestly I had no idea!

@Thesoundofmusic23 obviously completely up to you what you do, but as children, the Govt add 25% to any investment you make, which is great.