Setting up pension for a toddler

[IVFbeenverylucky]

Within a few weeks I will have three pre-school age children. I read very recently about how parents could set up a pension plan for their kids, which the kids would not have access to until they are 60. I won't be able to contribute much to this - certainly no more than a few hundred pounds until they are in school and not much more afterwards (I have to think of my own pension lol). It's more a way of getting it started so there's something there, than for serious money. Does anyone know how I begin? Bearing in mind the contributions will be very modest I obviously don't want their to be lots of fees and things, and it's really important to me this is pension, as distinct from other savings they could access at 18 etc. I'm not money savvy at all. Just have a plain bank account, earn money, spend money etc!

I really haven't got into the details. I more thought of starting a pension fund for each of my three, putting £500 in it on a one off basis, and then just seeing how things go.
Hopefully this will continue on a similar vein for a few years, and then maybe a bit more when they are in school.
I don't want to make a commitment to regular payments - this is really important to me at least until they are in school, I'm simply too stretched and even something low would freak me out.
I'm very impressed with some of the figures people are coming up with, which I had not really thought about at all.

Compound interest means that investing relatively small sums early can end up paying huge dividends. For example, if you started with £5000 as as lump sum and added £50 a month for 40 years, at a conservative growth rate of 4% it would be worth nearly £84,000 by the end of those 40 years. If you're able to invest that money upfront instead it's even better. If you invested the £29,000 above upfront, by the end of those 40 years it could be worth £143,000 at the same 4% growth.

I find it fun to play with the compound interest calculator!

Agree with this! Im hoping to set one up for DCs and put in around £50pcm.

Once they hit 18 that should be about £17k.

Once they retire at 60, that should be worth about £140k! The power of compound interest is amazing.

Having £140k in a pension pot as a starting point would be incredible.

I just wish my parents had thought of this! Definitely need to set one up for myself and if I retire at 100 I'll be quids in :).

@IVFbeenverylucky go for it!

You need little money early on, to make it work harder than you putting 100 into your pension now.. I keep talking about it but have not done it for mine yet.

Once it's open of course as they grow they won't be able to put much into it but it's there.

Try hargreve and landssown to start, look at a low fee global tracker and perhaps something more UK based like 100% equity life stragety and then something like vanguard s and pn500. Just to start.

Op I'm not sure it existed back then! But I certainly wish I had a little boost to look forward too.

@Bromptotoo

It's why it's so important to try and get them to understand investing early as possible.

So it's not just sprung on them at 18

I would get it out of sjp ASAP and get it into somewhere with lower fees and lower fee products.

It's a great idea as pensions are probably one of the most needed but most overlooked financial benefit there is .
The number of people who seem to wake up in their 50's realising they have little to no pension is frightening.

I believe that currently you can only take a private pension at the earliest 55
However, I believe that this will be rising to 57

Op have you paid into your own pension
Surely, this should be a priority over pensions for your children?

We pay into a junior SIPP with Fidelity for our 7 year old. No platform fees and low fund fees as we pay into a low cost global index tracker. Not sure what the one-off payment minimum is but you can make minimum monthly payments of £25. We plan to pay in until she has her first adult job. Unless you're financially stretched, it feels like a no-brainer to me with the immediate 25% return from the tax "relief" and 50+ years of compound returns in the stock market. We estimate we'll have paid in less than £10k over 15-20 years and she will have a fund of £150k+ by 60. We separately save larger amounts for other support for her when she becomes an adult.

We have set up a pension for our 2 yr old. You can contribute £2880/yr and the gov ads 20% (this is the ‘tax break’ you get, essentially, it’s totally independent if your tax liability snd bills, it’s paid for out of your taxed income). We’ve done 2 years max contributions and we’ll try and go a few more. We figure if we can even get it up to 15/20k early on it will compound to something significant (assuming the pit doubles every 10 years). We used AJ Bell and we’ve invested in global equity funds, some active, some passive. You can do a bit of research on the site on the funds available. I think having an existing pension will be motivating for him when he starts work and it will also hopefully create a nice backstop position if he is never in the position to contribute much himself. We also plan to help with with uni and a deposit so this isn’t instead of that but a great thing to do for relatively little outlay now.