The Future is Now: Setting Up Pensions for Children

At CCFS, we’re passionate about helping you plan for a secure and prosperous future for you and your loved ones. That’s why today, we’re going to delve into an often-overlooked aspect of financial planning: pensions for children.

By setting up a pension for your child, you’re not just giving them a financial head start in life; you’re also instilling the value of long-term thinking and investing for their

future. So, let’s dive in and learn about the benefits of setting up a pension for your child and the different options available in the UK.

The Benefits of a Child Pension

Tax Relief: Just like adult pensions, contributions to a child’s pension attract tax relief. For every £80 you contribute, the government will add £20, up to an annual limit of £2,880 (equating to £3,600 with tax relief). This tax-efficient way of saving means that your child’s pension pot grows faster over the long term.

Compound Interest:

Starting a pension early allows compound interest to work its magic, significantly increasing the value of the pension pot over time. The earlier you start, the more substantial the growth will be.

Financial Education:

Setting up a pension for your child provides an opportunity to teach them about the importance of long-term financial planning, investing, and the power of compound interest. This early exposure can help them become financially responsible adults.

Reduced Reliance on State Pensions:

With an uncertain future for state pensions, building a personal pension pot for your child ensures they have a more secure financial future and less reliance on government support.

Options for Setting Up a Child’s Pension

Junior Self-Invested Personal Pensions (SIPPs): A SIPP offers different investment options and allows you to invest in a wider range of assets.

Things to Consider

Accessibility:

Remember that money invested in a child’s pension is locked away until they reach the minimum pension age, currently 55. Ensure you’re comfortable with this before committing to a long-term investment.

Charges and fees: Compare the charges and fees of different pension providers to ensure you’re getting the best value for your money.

Investment options:

Consider the available investment options and the level of risk you’re comfortable taking on for your child’s pension.

Setting up a pension for your child can be a powerful way to secure their financial future, instill the importance of long-term planning, and take advantage of tax benefits. The key is to start early and make regular contributions to maximize the potential growth of the pension pot.

As always, if you need assistance or guidance in setting up a pension for your child, our team of experts at CCFS London is here to help. Contact us today to discuss your options and take the first step toward a brighter future for your child.