How much do you save for your DC?

[Chocolattcoffeecup]

How much are you saving for your DC and how are you saving it?

@VentressYes you can save in both as the two are separate. One is savings (ISA) so can be accessed any time, and one is pension, which can be accessed only at 57. But as he’s 18 you no longer benefit from the tax relief top up by government.

Thanks @luckycat888💐

Yes it’s separate, it’s got nothing to do with how much money they will have in the future, and the government tops it up, so I put in £2880 for each kid and they topped it up to £3600, so a decent proportion of the money it will end up accumulating comes from ‘free’ money.

Personally I don’t want either of my kids having access to tens of thousands when they turn 18. Some are sensible, some have to go through the learning process, and it’s sometimes impossible to know, so I don’t want anything spaffed away at 18 that can’t be made up for later. The house deposit money will stay with me and DH until it’s needed. Their junior ISAs will have enough to help them at uni or whatever they want to do, but not so much that if they blow it, that’s it for them in life.

@InveterateWineDrinker basically, it’s free money from the government. You put in max £2880 per year from 1-17 years old inclusive and they top it up £720 per year max. If you stop contributing at 17 years old, your total contributions over those 17 years would have been £51,840 but your child would have £2.8m (in today’s money) at 67, even if no further contributions after age 18, based on avg 7% growth rate. This growth (£51k to £2.8m) is achieved because of compounding over 50+ years.

@InveterateWineDrinker sorry I shouldn’t have tagged you! I misread and thought you were confused about it but seems like you already know and it’s the other parents that don’t get it.

SIPP nerds unite!

I think financial literacy in general is worryingly poor among a lot of adults, not specifically re: SIPPS as that’s quite niche knowledge but so many people don't understand mortgages, basic tax, ISAs, interest rates, even how basic bills work.

Martin Lewis created a textbook type thing for school-age kids that I plan to use with DDs as I think leaving home with a solid knowledge of practical finances is so important for life. Some people spend decades recovering from poor decisions or just lack of knowledge in their early 20s.

Honestly no…have kept all savings (ISA, SIPP, etc) in my name…and will do so until DS turns 18 then I’ll start filling accounts for him, mostly to manage future IHT. I plan on splitting between ISA’s and longer term (SIPP) as don’t want to limit him to just having money when he hits 57 ( or whatever age the government has pushed retirement out to by then!).

Around £75k per year between 2 DC. Split between JISAs SIPPs and Trusts. I appreciate we are very privileged. But I work very hard to do this for their futures. And also mine to be honest - I can take more risks in business because I know that they have their own separate funds. I can also blow all my own money in retirement if I want because they won’t need an inheritance as such.

Actually @luckycat888 the government contribution is not age related per se, it is to do with the fact that they have no earnings. So they can keep contributing the £2,880 per year as long as they have no earnings.

https://www.hl.co.uk/pensions/sipp/frequently-asked-questions

Yes, every UK resident under 75 can make pension contributions, even those with no earnings.
Their contributions will receive 20% automatic tax relief even if they pay no tax.
They can contribute up to £3,600 each year - a payment of £2,880 to which the government automatically adds £720.
This is a very tax-efficient way to invest for a non-earning spouse, child or anyone who's already retired.
Tax rules can change. Before applying, please understand the risks and features of the HL SIPP.

I think that he blew a lot of minds when he showed how useless building society accounts were for "investment" purposes. They really just barely protect money (and I do use them myself only for that purpose). You really need to be "invested" if you want to see real returns (above those found in property!!!!). I recommend this book for anyone starting their "investment" journey.

Harry Browne's Long-Term Investment Strategy

I think this is an interesting read.

https://www.hl.co.uk/news/do-people-in-the-us-invest-more-or-less-than-the-uk

Luckily DS is careful with money and knows that the isa money is for a house/flat deposit @hugasaurus. I will take a look at SIPPs. Thanks 😊

Before she died, my mum talked to me a lot about her finances. She was a keen investor, and it’s something I didn’t really know much about at that point, but she would sit me down and talk about what she and her financial adviser had discussed, what she was investing in, how the investments were spread, all that sort of thing. And when she died, her financial adviser came to see me and we talked about it all together.

I think families can be so cagey about finances and money but my mum being open with me meant that when I received the money from her investments and savings, I felt like I knew what to do with it and understood how to use it well.

In fact when it became clear the end wasn’t far away, we talked specifically about how I could use the money that would be coming. She was the person I would always ask about that type of thing and I’m so grateful we were able to discuss it when she was around. For some people it may have been morbid but it was so important to her that she was leaving something behind to help us. I’m forever grateful to her for being so open about it.

So as well as saving the money, I think it’s so important to talk to our children about it.

@compoundingisasuperpoweri know they can continue contributing but they don’t get the gov top up right? I know it’s not age related and earnings related but if they are 18 and no income, why would they contribute £3600 and not £2880?

We have saved what we could over the years. As soon as we were in a position to we saved about £50 per month for both DCs which was boosted by a few thousand from a grandparent. This increased a bit as we got pay rises.

We invested in 5 year bonds at one point and then at 17 moved the money into savings in their names but they don't know the account details. They both know there is money in accounts for them but not how much.

For eldest (21) we have opened a LISA which has had 2 years of max money (plus gov contribution). This is sitting at almost £30k across savings and LISA (nominally for house deposit). Youngest will have broadly the same at the same age.

We have been thinking about how to continue saving for them as long as we can - currently in a very lucky position of our mortgage being paid off and being able to save about £300 per month each for them both. I like the idea of a SIPP but worry about the fees (as we have literally no idea about investments so would not be self-managing) - will have a look at Martin Lewis. I think for this we'd have to put money into their accounts as I don't think third parties can pay into an adult's SIPP (but happy to be corrected).

What I want is for them to have the option of perhaps retiring at 60 if they want so want there to be enough money for say 8 years of a reasonable amount before state/their own occupational/private pensions kick in.

We have some separate savings that we can help with deposits too. DH will get a very nice lump sum at retirement in a couple of years so we will be comfortable in our own retirement even with the money we have/are saving.

To be honest I thought we were doing really well but some of the amounts on this thread are insane.

I am going to die soon @hugasaurus so it’s certainly something I want to understand more about and share with DS (once his a levels are over). He’s doing economics a level so way better at this than me I’m sure.

Forgive me if I am not understanding your question.

Anyone, of any age under 75, even with no income, can put in £2880 a year into a SIPP and get the £720 government "tax relief". My family member is unable to work in paid employment but we make the £2880 payment every year to ensure that they are not dependent on the state when they reach retirement age.

@luckycat888 they do get the top-up, as long as they have no earnings. This is actually very relevant to women (and men) who take career breaks for caring responsibilities, they can also keep contributing £2,880 and get the £720 contribution from the government.

@compoundingisasuperpowerthank you for the clarification!

@XVGN - ignore me, my own misunderstanding of SIPP tax relief

Glad it's clearer - I think the government needs to do a better job of explaining personal pension saving; particularly if they are trying to get people to invest in the stock market more.

The government's Pensions Commission published a report last month with some fairly bleak data about pension savings in the UK, and there have been various other reports by thinktanks over the years, including one published yesterday by Pensions UK. Just google (other search engines are available) 'pensions saving uk' and click the news tab.

If you accept that you need to save much, much more for even a moderate lifestyle in retirement then the resources are out there to get your head around it. But then people say "I don't trust banks/pension companies/investment firms" when what they really mean is "I don't understand it and can't be bothered to learn" as well as thinking "that's nice, but I'd rather have a long weekend in Barcelona right now" instead of "I should get to grips right now with planning my own financial security in decades' time."

There is absolutely no culture of deferred reward here, and my arse caves in when I see my acquaintances book another £1k weekend break to see them through to their £6k half term holiday when they've not got any savings at all.

It's also not helped by seeing one's own parents living in mortgage-free million pound houses and receiving £40/50/60k final salary pensions for thirty years after retiring at 55 or 60 - without any thought having been put into it at all. While those kinds of retirements are still possible for a very select few, they are far beyond the wildest imagination of the overwhelming majority, yet I still meet people who think that sort of retirement will somehow land on them by accident, or that someone else will sort it for them.

@InveterateWineDrinker as a nation we are sleepwalking into a massive retirement & housing crisis.

People aren’t saving enough for retirement but many are also now not able to buy a house. When they’re too old to work, they’ll still be renting and will need either social housing or housing benefit (or both), but as I know from my mum’s experience of retiring purely on state pension, housing benefit does not get you much.

The housing benefit bill will skyrocket, and there simply won’t be enough properties that are cheap enough for those who rely on the state pension (+ housing benefit) to rent.

My SILs and their husbands are in this camp - no pension, can just about get by while they’re still working but would have to move town if they were reliant on housing benefit.

@InveterateWineDrinker @SlipperyLizard i just don’t think that we are sleepwalking into it. I may be more tuned in than most but there’s a ton of info out there and a lot of publicity around retirement and how important is it to save for a pension. Some people are just wilfully ignoring it, or some can’t do anything about it due to COL.

and for what it’s worth my parents live in ‘only’ a 200k house max and live of a state pension. No final salary pensions here. My sis and I both went to uni and have worked consistently since early 20s and saved diligently for both house deposits and pensions.

Some people are just wilfully ignoring it, or some can’t do anything about it due to COL.

All too true, but in my circles there are far more who simply place a much higher priority on discretionary spending now. No-one seems prepared to admit that the UK is now a really poor country with both low productivity and really high costs, and that the standards of living we think we deserve are thoroughly unaffordable.