Hasanyone set up apension for their kids?

[moondog]

Any Any thoughts or pointers?

Imagine if you contribute say £3k a year each from birth until the end of full time education, the chances are that they would never have to sort out a pension for themselves. Sounded like a good idea to me but I have to say I didn't do it ...

I haven't any pension plans for me yet let alone the kids.

My God we live on completely different planets sometimes Moondog.

Ah well ,sorry if it sounds smug.There have to be some advantages to having a dh who islaways working abroad.

We actually asked our IFA about this last week, and she said that she has set up a few, that setting it up so early makes a HUGE difference to the eventual payout, and that the smallest monthly contribution she's come across is £20 per child pcm.

seen a few clients who put the £3,600pa in. Good idea if you have sufficient savings for yourself.

Are you thinking about it then Rolf?

Yes, we are. When we hear back from the IFA with details I can let you know, if you like. I think I asked for details of medium-risk ethical funds.

Thank you. I would like to hear.
I really want to do this andkeep on at dh about it.

isnt it better to teach your children the value of money, skills of budgeting??

you have enough to give them a trustfund

you are assuming they will be too stupid to manage financial affairs when they are adults

here you go Riven

Pension funds used to receive tax credits on dividends. These tax credits were worth around 20% on dividend income into the funds. Then GB abolished this with pretty devastating effects. It cut all income into the pension funds by approximately 20%.

Most public and private sector funds are in deficit now, largely because of the axing of the pension fund credit. The effect is that people have to make significantly larger contributions into their funds. It has cost me personally quite a lot of money, and I was lucky enough to be able to afford it. For people who can't afford to top up their pension funds it must feel a bit like robbery (not much financial sense in the UK in having an inadequately funded pension)

It's a good point that charlie makes about children making their own financial decisions and our role being to teach them to manage their money.

This is interesting and not something I'd previously thought about. Can someone explain though, what's the advantage of setting up a pension over full investment in the child trust fund and equivalent ammount in a cash savings account? Neither of these are subjected to tax on either capital or interest. My intention for by DC is to try to put the max into both (for as long as I can afford it) and then transfer into ISAs when they turn 16, or 18 when it comes to CTF. Does a child's pension qualify for the 20% tax rebate that an adult's would?

I was going to but then didn't, as it's money that's tied up that ds may need before for a house deposit or paying for Uni. There is also the point my mil made, that (God forbid) he might die before he reaches pensionable age.

As he is an only he will get it all when we shuffle off this mortal coil, so we are effectively providing a pension for him anyway.

I am programming my child relentlessly into providing for me well into my own retirement. I fully expect that with her combination of boundless energy, creative talent and climbing skills she will be able to support herself and myself. I will of course be on hand to offer her financial advice....

Good grief, we've brought them up and paid for education and everything else. We intend that they get themselves decent jobs and make their own savings and that we shall spend their inheritance.

I am wondering what tax efficient ways are there for saving for dcs.

The CTF limit is £1,200 a year. Interest is tax-free up to £100. Children don't have an ISA allowance until they are 16.

Since children don't earn income, I don't see any point in putting funds into a pension in their name, since they don't get the instant uplift from any tax relief that their parent would had the parent invested that sum into their own pension (unless I am mistaken).

For adults, the rationale for making pension contributions is that you are not taxed on the way in (ie pension comes out of gross income) but taxed on the way out when you retire and get an income out of the pension fund.

Whereas for ISAs, you are taxed on the way in (ie the investment is out of net income) but not taxed on the way out (ie no CGT or tax on ISA interest).

ISA is perfect for a child because they don't pay tax - therefore not taxed on the way or out. But pension is silly tax-wise because they get slammed twice with tax - taxed on the way in (out of parents' net income) and taxed on the way out.

I am not sure if I am right about the above ie no tax advantages for a parent to put sums into their child's pension fund. Happy for someone to explain otherwise.

In the meantime, it makes sense to use the parents' ISA allowance to invest for the child (if not already maxed out) or just set up a normal investment account in the child's name which gives much more financial flexibility than a pension.

No, I pay enough into my own to ensure a comfortable retirement - they can sort their own out!!

Seriously, I want to help my children get started to some extent, but buying their pension is a step too far. I think having to strive for things oneself is a really important motivating factor in life.

Yes, we have set up a pension for our DS - his child allowance goes straight into it; we set it up when he was born - £60 a month (child allowance a little more now but we haven't increased it).

Interesting comments have been made above - we are happy to 'invest' this for DS as a long term benefit but I am known as one of the 'meanest' mums around; Ie: have just posted on the clothes thread that I would NEVER buy DS new clothes, we very rarely spend on meals out with DS apart from a birthday treat, he doesn't have any form of technological gadgets, cinema trips etc. I am sure that some parents would happily spend £60 a month on 'extras' that I would see as extravagent but the same parent might feel investing the £60 is equally indulgent. DS not aware of the pension.

As always, lots of different view points on this sort of subject.