Pensions for children.....

Sceptre

I saw an article on this subject recently, and am now toying with the idea.

I have an 11 year old son and have a Junior ISA set up for him.

I want to give him the best chance I can. Perhaps property would be a better investment in the long term.

Any thoughts on the pension idea? Anyone got one for their child/ren?

Cheers.

dunstonh

Pensions for the benefit of a child has proven quite popular with grandparents more than parents (grandparent knows they are helping the children long after they have passed away and provides a lasting benefit rather than something spent quickly and long forgotten years later).

The objective is very different to a JISA. JISA is money to blow in their teens. pension is money in their retirement.

Sceptre

dunstonh wrote: »

Pensions for the benefit of a child has proven quite popular with grandparents more than parents (grandparent knows they are helping the children long after they have passed away and provides a lasting benefit rather than something spent quickly and long forgotten years later).

The objective is very different to a JISA. JISA is money to blow in their teens. pension is money in their retirement.

Thanks for your reply dunstonh.

I know what you mean about the JISA. He's not blowing it though - even if I have to tie him down.

Sadly, he doesn't have grandparents - forward thinking, or otherwise. Just me, trying to cover all bases.

I like the idea of the money being 'locked up' for a very long time, and the tax breaks involved. I will spend a bit of time looking at stakeholders and SIPPS now and see what I can find out.

MissKitty

Hi There

I took out a Stakeholders Pension for my daughter when she was 2 years old, she is 10 this year. When I did it and mentioned it to family and friends I got a few negative comments about what a silly thing to do for a 2 year old. I'm the one laughing now as she has a nice little pot of money.

My plan is for her to take it over later in life when she is working. I think they are a great idea as who knows if there will be a state pension when our children are old. It's a good long term investment that has time to grow and by the time they can access it they are adults so there is no silly spending. I know when she is an old lady she will thank me for it.

I'm a great believer in planning for the future, weather it is for yourself or your children. I have several investments on the go for my daughter and have done so since she was born. I have just opened a Junior ISA for her. You just need to keep your eye on your savings and investments and move them about for better deals if their not performing.

Good luck with whatever you decide, I know it can be a bit of a minefield.:j

jamesd

On thing to remember about pensions is that for a newborn it's likely to be more than sixty years before they can get the money, quite possibly longer. There's a very high chance that they would benefit more over say 35-40 years before then if you were instead to accumulate money that you then use to help them with their first property deposit. That first deposit is often difficult to accumulate.

DavidLaGuardia

Sceptre wrote: »

I want to give him the best chance I can. Perhaps property would be a better investment in the long term.

Cheers.

Long term?
Propety since Dec 1985: 323.37% (Halifax Property Index)
FTSE Allshare since Dec 1985 total return: 1,078.63%

Property also gets the benefit of living in it or getting a rent though both investment routes have costs and property has addtional labours and hassle (potential rogue tenants and unexpected maintenance).

Gearing (borrowing to invest more than you have) is perhaps easier with property but you are taking on an extra dimension of risk in the renting market (such as paying a mortgage, council tax and maitenance costs when you have no tenant and mulitplying your loss when property prices fall. The gains are then also subject to capital gains tax which is avoided in a JISA and pensions).

Investing in the stock market regualarly also gets you a greater gain over time through pound cost averaging - where you gain from buying at a low price than you lose when you buy at a high prive.

Easy and cheap lending in recent years couple with a property boom, as well as it being a more tangible and easily undertood asset has slightly distorted the perception of property. Although one shouldn't knock it a part of an investment strategy.

Diversity is the name of the game..

He will be glad of enough money towards a house deposit to get him on the housing ladder and putting money into a pension for a child will give them a potential boost that is ring fenced from potential abuse, future spen thrift spouses etc.

If you can afford to do both or split the budget!

westy22

Most people think that making pension contributions for a child is of no benefit to them until they are in their 60s. Its not true - if a child has been given a good head start in a pension fund then compound interest and growth will boost it exponentially and therefore they will not need to pay so much in to their pensions when they are in their 20s and 30s and need most of their salary for home buying and children.

atush

A pension is a great idea, but only after you have saved into a Jisa and other routes ( I like investment trusts) first. AS he will benefit more from not having to build up debt at University through student loans.

No reason you can't do all three (ie JIsas, other savings/investments and a child pension)

Sceptre

atush wrote: »

A pension is a great idea, but only after you have saved into a Jisa and other routes ( I like investment trusts) first. AS he will benefit more from not having to build up debt at University through student loans.

No reason you can't do all three (ie JIsas, other savings/investments and a child pension)

Just an update really.

Thanks to lots and lots of reading, and as usual, very helpful advice from everyone, I have now set up an Aviva Stakeholder Pension for my boy .

He already has a JISA, an easy access regular saver and also a newly set up Aberdeen Investment Plan, so I am hoping that I have a range of short and long term savings now covered for him, and we can build from there.

Cheers

xylophone

Be careful of tax treatment of income arising outside tax exempt schemes if you are giving money to your child.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_10013916
http://www.hmrc.gov.uk/individuals/savings-income.htm
http://www.hmrc.gov.uk/tdsi/children.htm

atush

that is one lucky child to have such a forward thinking parent! I have saved form mine, and am putting them thru Uni w/o debt.

But I haven't set up a pension for them. Oldest is greaduating and already has a good job lined up (incl pension) so that is one down and 2 to go lol.