Enables IFA’s in Bishop’s Stortford help many clients with financial planning and personal pensions, but have you thought of setting up a pension for your child? According to HMRC figures, around 60,000 under-18s already have a pension plan.
Enable’s IFA’s believe many parents worry that their children would not use the money saved for them wisely if they are able to spend it as soon as they reach 18. The accessibility of ISA cash might seem more attractive and could pay for university fees, a car, even a house deposit. But there are a number of good reasons to set up a pension for your child.
The key thing about setting up a pension for your child is that they would not be able to access it until they were 55 under current rules. The downside to this is that the age at which pension pots can be cashed in is being pushed back all the time. Already Enable’s IFA’s know that you won’t be able to withdraw your private pension until 58 by 2028.
Perhaps the biggest advantage of saving into a pension, however, is the generous tax relief on contributions your child will get even though they don’t earn an income. Every child is eligible for a pension from the day they are born. Taken out in the child’s name anyone can contribute to it; parents, grandparents, other relatives to a maximum of £2,880 year and get 20% tax relief. This means it is topped up by the government to £3,600.
The other key advantage is the long-term nature of a child’s pension investment, they will benefit from compounding, which is reinvesting the income they receive from their investments, thereby increasing the amount of money working for them over the longer term. In simple terms, it’s converting income into capital to earn more income. Enable’s IFAs are happy to help you look at your pension options.
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us. NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE.