Students and Pensions

atypical

There was an interesting article on this here:
http://www.fool.co.uk/news/investing/2010/02/08/my-millionaire-daughter.aspx

"Let's make some assumptions: I continue these monthly payments for as long she qualifies for Child Benefit (currently age 18); investment returns will be 9% a year; and after 18, she makes no further pension contributions of any kind. She just watches her pot grow until, in the year 2074, she finally retires. At 65 her retirement fund would be worth £3,079,600."

And to reiterate what Reaper says above:

"Why have I done this? I think it's one of the best presents I can give her. For the whole of Alice's working life she will know that her retirement is already looking pretty rosy. She won't need to struggle to fund pension contributions in her twenties and thirties. She won't be left playing 'retirement catch-up' in her forties and fifties, when many people suddenly wake up to their imminent dependence on the paltry state pension."

jamesd

Which would be worth £450,894 at 3% inflation for all 65 years. Around £27,000 a year of taxable income. Chances are that she's got a better use for a significant portion of that money earlier in her life. Like buying a place to live instead of renting one and profiting from the return on investment from not paying rent.

Loughton_Monkey

dunstonh wrote: »

it can be but it comes with risks as well. Such as legislation changes such as reducing the annual allowance or a reduction in higher rate relief or the basic rate of tax or the removal of the ability to factor in pensions into working/childrens tax credits. So, you really have to be on the ball with what is going on.

Understood.

This is always a risk. Usually, some degree of 'warning' with 'sale of the century' potential, but not always.

Pensions have always been a political football and presumably will remain so. If I had to predict future changes, I could see pensions being restricted to Basic Rate relief some time in the future. I could even see tax relief abolished completely, but only in tandem with an alternative arrangement similar to ISA's [but with equivalent limits to pension limits].