JISA and/or Stakeholder pension for child?

Skibunny40

We currently have a CTF for my 10 year old son, but haven't paid any extra into it for about seven years.

We now have some spare cash, but I'm thinking about paying it (bout £80 pm) into a Stakeholder pension for him - haven't opened one yet. If/when the rules change and he can have a JISA, we'd split it 50/50 between the pension and the JISA.

Does this seem like the best use of the money? Any recommendations for good stakeholder pensions?

Thanks - and sorry if there's any obvious info I haven't included...I'm new to this!

dunstonh

JISA and/or Stakeholder pension for child?

They are two very different things suiting two very different objectives. Its a bit like asking if you should buy a bike or a helicopter.

Does this seem like the best use of the money?

Depends on what you are trying to achieve.

Any recommendations for good stakeholder pensions?

most stakeholder pensions are obsolete now with personal pensions being better value for money. However, small premiums can still see stakeholder suitable for some.

sabretoothtigger

Stakeholder is good no brainer I think still for small sums which this would probably be and it can be converted later, thats what i did no fees

2058 is when it'd pay out earliest I believe, super long term hence low fees fairly essential to compound growth

Skibunny40

I guess what I'm trying is exactly two different things - some money my son can use for university / house deposit and then some really long term money (working on the theory that the earlier you start a pension the better, and my son can also add into it in later years.)

Thanks for the comment about stakeholder pensions not being as good as personal pension in some instances... I'll look into that a bit further.

grey_gym_sock

i wouldn't put anything into a pension for a child unless you've got a very large amount to money to give them overall, most of which they'll be able to access much sooner. it's bizarre to give them money which they won't be able to access when trying to do something sensible like putting together a deposit for a house. remember that, if you can help them (for instance) get a house deposit sooner (e.g. at 25 instead of at 30), then they can put the money they don't have to save for the deposit (between ages 25-30) into a pension instead.

sabretoothtigger

Isnt vice versa true though. Presuming people start a pension in their twenties which they probably should.

These are small amounts anyway, thing is with kids they will easily blow through any money while learning it aint that easy to save. Thats impossible to do with a pension.

I knew of someone who spent twenty years worth of his university fund before he even got there, Italian made alligator skin shoes I think was one item on the itinerary just before realising he could no longer afford to go

FatherAbraham

Skibunny40 wrote: »

Does this seem like the best use of the money? Any recommendations for good stakeholder pensions?

I've just used Cavendish Online, the discount broker suggested by the low-cost pensions article on the MoneySavingExpert website, to set up a couple of stakeholders, one of these for a three-year old.

Look carefully at the charges -- for example, AEGON (Scottish Equitable) via Cavendish Online (i.e. with full trail-commission rebate), costs 0.6% p.a for investments made via regular contributions, but only 0.5% p.a. for investments made as single contributions, so that structure might not be optimal for your desired £80/month, unless you can be bothered to push the contribs in via cheque regularly, rather than letting the provider pull the contribs in via direct debit.

Warmest regards,
FA

ozzage

Another thing to consider for a child's pension is that the government will rather helpfully add 20% tax relief.

I'm a big fan of the idea of pensions for kids, and have both a JISA and a SIPP for my child. You can make a massive difference to their retirement with what is actually a very small amount now.

grey_gym_sock

ozzage wrote: »

Another thing to consider for a child's pension is that the government will rather helpfully add 20% tax relief.

and then take 15% back when you draw the pension (assuming tax rates don't rise over the next 50+ years).

and you'll probably lose the other 5% in pension charges, as they are generally marginally higher than unwrapped investments or ISAs. which adds up over many decades.

if you're worried about young adults blowing all their money (which far from all of them do when given the chance), you can always put it in a trust which only gives them the money at (e.g.) 25.

sabretoothtigger

25 is the new 15

Reaper

I set up a child pension but that's in addition to a CTF and bare trust as they all serve different purposes - I certainly wouldn't only do a pension.

However I do consider it a bit of a myth that the child will not benefit from it until they retire. By building up a pot early it means they will not have to contribute so much in their early working years when money is tight.