Stakeholder Pension for children - is it worth it?

piratefish

Hi,
my first post here so please be gentle
I am considering opening a stakeholder pension for each of my children but really am not sure if it will be worthwhile. I would really appreciate some advice.

• I have 4 children aged between 18months and 15 years. All 4 kids currently have savings accounts and regular saver accounts and the 2 younger ones have a government child trust fund that I pay birthday/xmas money into.
• I would currently only be able to afford to pay in £10 each per month whilst keeping up the payments into their savings accounts . I am going on the something is better than nothing theory! Would this be worthwhile, especially for the older two children?
• My eldest (15) is pretty certain to be doing A levels, starting next Sept for 2 years, then uni so would realistically only have my contributions for a good few years yet. He will pay a similar amount per month to me for the next couple of years or so as he does a paper round (he's done it for 2 years and saved most of his earnings!) but this will end if and when he goes to uni as he'll need every penny then from any part time job he does with rent etc to pay! It a is similar situation for my 13 year old too.

Many thanks for reading, sorry it's a bit long and rambly, I can never get things down concisely! I may not be able to get back on the boards until tomorrow evening so please don't think I have gone away!

EdInvestor

I'm not a fan of this idea for 2 reasons:

#Kids usually need parental help well before they are 55 when they can access 25% of the pension money - for a deposit on a house,a wedding, university fees etc. Better to keep spare funds accessible, not locked away in a pension fund where you can't get them out.

#The fact that it's locked away and forever inaccessible tends to mean the kids don't appreciate your effort to save it.

In addition to this, very small sums are usually either not acceptable to the providers, or get eaten away by high charges.

dunstonh

pension products/rules seen to change on average every 8 years. This money will be put away for them for around 60 years. So, putting the money into an arrangement that is tied up for 60 years is not that desirable.

The concept of what you are doing is good and the Govt wanted people to do that but the reality of it is not as great. Plus most stakeholder pensions have a minimum contribution of £20pm.

ReportInvestor

Hi piratefish and welcome to the site .

I would agree with EdInvestor given the size of the sums involved andthe fact that they are more likely to need help at university or shortly afterwards to keep them out of debt (which will provide a decent "return" on your money).

In other circumstances I'm not against pensions for children.

The key to my thinking is the incredible power of compound interest over 50+ years.

With other investments, they are likely to get cashed in at some point and the "compounding magic" will be broken.

But if the alternatives are pension v essential house deposit then I would choose the house deposit.

$17mma

I am glad someone has asked this as I was considering doing the same for our children. I read the article "My Son the Millionare" dated 16th June on www.fool.co.uk and it seems to support pensions for children.

piratefish

Thanks to everyone for your replies, your time and expertise is much appreciated :-)
Still not quite 100% decided against as all my kids do have quite a bit put away for them already (I'm a long way from being rich but am a 'tightwad' as my hubby says and a consistent saver!)- but the point about a house deposit is something I hadn't considered,
thanks again

ReportInvestor

$17mma wrote:

I am glad someone has asked this as I was considering doing the same for our children. I read the article "My Son the Millionare" dated 16th June on www.fool.co.uk and it seems to support pensions for children.

My view is that everyone who can afford it should start a small stakeholder pension for their baby.

This money cannot be taken out of the stock market for 60/70 years and the child will get a statement every year. What better way to ensure that they get the message of compound growth loud & clear : ?

It would be a fantastic educational tool for your child, that might positively influence his/her future investments / financial choices, far above and beyond the benefit they get from your own investment.