Do you have a pension for your child?

[SayWhatNowNow]

If you have a pension for your child please can you share details of the provider you chose? Would you advise for or against? Thinking of opening one for my children. Even more put if £5 a month or whatever. They are under 18. I’m thinking this would motivate them to start saving for their own pensions as soon as have their first jobs.

Both of my children have pensions, started around 15 years ago when they were small. We started by paying in £25 per month and it has increased to £26ish over that time.
I chose the funds that they invest in and have no idea how to change their pots.
I somehow managed to choose slightly different investments for each of them due to choosing them on different evenings and not remembering what I had picked.
DD is 2 years older than her brother and I set her up to retire at 60. So her pension will have 7 years and 1 month less payments than DSs predicted.
However, hers is hugely outperforming his. His is really not doing well at all and I need him to go into the Halifax and change things around a little but we don’t really know how to!
We chose to invest in pensions in order to build a decent pot over a long time with not too much financial hardship.
We still pay 18 year old DDs contributions as she is extremely poor. Hopefully one day she will be able to take it on.
Savings over 15 years wouldn’t have produced much for them either so I don’t really know if we have done rightly or wrongly.

Misbeehived

The main advantage is you get 25% added to what you put in as tax relief, even if the child doesn't earn anything.

That's not generous enough to persuade me. The chilld will have to wait until they are at least 55 to get the money out. Who knows what the tax rules will be then but my guess would be there will be some tax to pay on the way out.

I like the idea of doing it to encourage pension saving habits though.

There’s a really good episode of Money to the Masses podcast on this subject, it’s called How to become a Millionaire and they crunch the numbers on pension contributions from childhood and how a relatively small regular amount, started early, can grow into a million pounds for retirement.

Thanks all for the suggestions.

For me, it is not about the amount per se (will be putting in very small amounts). It’s just to hopefully get them to think about pensions and savings as early as possible.

@FreshEggs

There’s a really good episode of Money to the Masses podcast on this subject, it’s called How to become a Millionaire and they crunch the numbers on pension contributions from childhood and how a relatively small regular amount, started early, can grow into a million pounds for retirement.

Brilliant! Thanks

www.thisismoney.co.uk/money/saving/article-6425023/Save-2-880-year-18-years-child-1-5million-pension.html

Rules allow relatives to salt away up to £2,880 a year in a pension for a child and have it topped up with tax relief to £3,600. Starting one for a new born would cost about £52,000 over 18 years – with a Government contribution top-up of nearly £13,000.
Jason Hollands, of wealth manager Tilney, says: 'Assuming investment growth of 6 per cent a year until the child reaches age 60, they could end up with a pension worth nearly £1.5million.'

@Winebottle thanks a lot for replying. I’ll have a look. I think it’s a good theoretical model but I think lack of political certainty over such a longtime scale does make it less attractive (to me anyway).

Ours have all started pensions when they started working. I don’t see it as our place to set them up. They’ve all had and continue to have financial support to get on housing ladder, to pay for weddings etc but pension is down to them.

Mine do. I don’t have any faith that there will be a state pension when they retire, would hope to be in a position to continue to support them financially when they reach 18 but would prefer not to give them a lump sum to piss up the wall then, hope that it provides them flexibility through their career to perhaps not contribute as much if buying a house/having children etc, and think as a long term investment will perform well and give a reasonable retirement income from a relatively small contribution now.

@Misbeehived

Why are you worried about politics when saving for a pension?

DH is a high earner so we max out all types of ISAs and pensions anyway. We figured we might as well add the annual £2880 for DC too. If the income was more average, we’d prioritise own pensions and helping DC through uni and onto the housing ladder.

@Lovelydovey

Mine do. I don’t have any faith that there will be a state pension when they retire, would hope to be in a position to continue to support them financially when they reach 18 but would prefer not to give them a lump sum to piss up the wall then, hope that it provides them flexibility through their career to perhaps not contribute as much if buying a house/having children etc, and think as a long term investment will perform well and give a reasonable retirement income from a relatively small contribution now.

Exactly this, I want savings that they can't blow at 18 and think of 20 odd years of lovely compound interest before they start work!

This is a good link to play with the numbers
www.hl.co.uk/pensions/junior-sipp/junior-sipp-calculator

It'll be the first thing I do financially for as yet unborn DC1

I pay £40 per child into a pension with Hargreaves land down, maybe fund smith I think. I don’t really look at it. I read somewhere that the earlier you start a pension the lower the percentage if income you need to pay and you should pay a percentage half the age of when you start e.g. if you start pension age 10, you need to pay in 5% of income . If you start age 20 then it’s 10%.
Not sure if that is true but it vaguely makes sense

The main advantage is they can't access the money until pensionable age, which can be a disadvantage also as they may need the money earlier in life.

No, but the more I think about it the more it sounds like a good idea. They can't blow it at 18. I could squirrel away £10 each for them. More to get them started and they can pick up when they start work.

No
We never had spare money to do this
My children are late 20s now
We didn't get anything from Gov to start us off .
If we had spare then I'd have at least tried to start a savings account for them .

Why are you worried about politics when saving for a pension?

It's a pot of money for a future government to go after. That's true of all types of saving but it's especially true for pensions because you have got tax relief on it.

You have to pay tax when you take money out of a pension so your child is completely at the mercy of what the rules and rates will be when they retire.

There is a limit on how much a person can have in a pension before they get completely clobbered with tax.

I think 20% relief is the minmum amount of relief you can expect for tying the money in for so long. Maybe the child will get 40% when they are working or basic rate relief will go up.

I agree but to me it is a nice problem to have- a pension pot so large it causes you tax problems- plus you get the tax relief on the way in so it’s fair enough there are tax implications on the way out. I don’t have a problem with that as a tax policy.
For me, I save into ctf which they will get at18 and then the pension they can access age 60 or whatever, I don’t intend to pay forever, maybe until 25

@Misbeehived

Could anyone explain the benefits of this over savings/JISA. It’s not something I was aware of but it’s interesting.

Child can have £2,880 paid in and recieve basic rate tax relief up to £3,600.

ISA = £3,600 paid in £3,600 credited
Pension = £2,880 paid in £3,600 credited

Access is a huge thing, ISA is from 18 pension is from 55.

If the parents have excess income, and it does not impede upon their own planning. Then there is a place for it.

It gives the child a huge boost to their pension planning and retirment for later life.

Both my children have pensions set up by their grandparents. They can access the money early though I'm not sure how much that would cost them in penalties.

They can access the money early though

You can’t access pensions early. That’s the whole point of them. Maybe they’re adult children with LISAs?

@wegetthejobdone

Both my children have pensions set up by their grandparents. They can access the money early though I'm not sure how much that would cost them in penalties.

They can not take the money before the age of 55

You have to pay tax when you take money out of a pension so your child is completely at the mercy of what the rules and rates will be when they retire.

Income tax could be higher (or lower) in 60 years. However, with the government top up and the money well invested, the gains on the free government money alone are likely to be be far far greater than any steep income tax. IMO anyway.

We save £20 for each child (2) every month. I deliberately chose a pension over a JISA because they get an extra £5 a month tax relief on their pension.

I want it to be a pension so that when they are pensioners (and we are dead and gone) so they know we cared about them and loved them for every day of their lives.

We save with Standard Life. (I think they might be Aberdeen Standard now)

We've paid in £720. There's been tax relief of £180 and investment growth of £42.

That's 36 months of payments!