Pension for my children

lynn_m21

I want to start a pension for my children. They are 1 and 3.

I am only going to be putting £50 a month in to each pension.

I have read martin's article on pension discounters and like the sound of that.

I am clueless what to choose though.

Any advice or should I use an IFA?

Thanks in advance

Lynn

dunstonh

Any advice or should I use an IFA?

An IFA can be a heck of a lot cheaper than the discount brokers. I know that sounds strange but its because the discount brokers only offer a limited range of providers and products which are mono charged products. If you are aged under 35 then multi-charge products can be cheaper even with the IFA taking maximum commission. At age 1 and 3 these will be the cheapest options available.

McKneff

personally i would nt put it in a pension, they wont be able to touch it until they are old then will only get 25% lump sum and then the rest in pension.
what about when they need money for Uni, or a wedding or a deposit for a house. Surely there must be something else out there than tying this money up for effectively 50 years or so. Once it is in there you cannot get it back and you have no control over it whatsoever

dunstonh

personally i would nt put it in a pension, they wont be able to touch it until they are old then will only get 25% lump sum and then the rest in pension.

You say that as if its a bad thing

what about when they need money for Uni, or a wedding or a deposit for a house.

Thats what parents are for.

and you have no control over it whatsoever

You have full investment control.

The concept of investing for children in a pension is a good one as long as you are not making yourself short of money or not leaving yourself short for future expenses you would like to help out on.

If you are wealthy then paying into the pension can not only get tax relief on contributions at 20% but also avoid inheritance tax at 40% and get tax free growth. There is also the satisfaction that in 60 or so years time, your children will benefit from your forward thinking.

If you paid £50pm for 18 years and then stopped you would give your child around £10,000 a year retirement income in today's terms. Thats not a bad headstart on just £10,800 of contributions over the 18 year period.

EdInvestor

The only problem with pensions for children is that by the time they get around to thanking you for them you'll be dead.

dunstonh

EdInvestor wrote: »

The only problem with pensions for children is that by the time they get around to thanking you for them you'll be dead.

Well, it will give them something for the rest of their life to remember you by then

lynn_m21

Thanks for the replies.

I am also saving for their university, so the pension is really to provide something for their long term security and possibly to help them look after my grandchildren when they need help.

It makes more sense to me than putting money into their Child trust fund which they can then blow on booze and holidays, or worse, when they are 18 (what would you have done with it? I'd have blown it for sure).

I think I am going to try and find a good IFA and see what they can suggest on which actual pension to go for.

Lynn

dunstonh

I think I am going to try and find a good IFA and see what they can suggest on which actual pension to go for.

Mention to the IFA that you are aware of contracts that get the charges over with in the early years. Clerical Medical, Norwich Union & Scottish Life for example do these (there are others). It is these personal pensions that cut the annual management charge right down and make it cheaper than stakeholder pensions (on nil commission, let alone normal or discounted). These are the ones that you want to look at. A good IFA will know that anyway but just in case....

Debt_Free_Chick

lynn_m21 wrote: »

Thanks for the replies.

I am also saving for their university, so the pension is really to provide something for their long term security and possibly to help them look after my grandchildren when they need help.

My only comment on this, is this .....

The pension will only "work" if your children are over age 55 when your grandchildren need this help. If your grandchildren need help when your kids are in their 40s then they're stuffed as they cannot access the capital you've built up - and this could be hundreds of thousands of pounds, possibly a million pounds and more.

A pension really only has one purpose - and that is to provide an income in retirement i.e. once you are of the age that you are no longer able to work, to generate an income.

Pensions are great if they're used for the purpose for which they were designed. For any other circumstances, they are likely to be too inflexible.

Think carefully.