Are children's pensions a good idea?

TARDIS

Thinking about starting a pension for my kids, but not sure if it's a good idea or not. Would be interested to hear other's thoughts/experiences please.

I like the idea of free money from the government and compounding over many decades, but who knows when they'll be able to access it in the future. And if I did open one for them, not sure what to choose either. Possibly a SIPP with VLS100 or 80.

They already have full JISAs, but maybe I should just use up the rest of my ISA allocation instead and give them it later if I don't need it?

pip895

I have gone for an ISA & SIPp with VLS100 for my daughter - I was wondering about switching future payments to a lifetime ISA though for the greater flexibility (she has just turned 18)

One advantage of the SIPP over the ISA is that its locked away and safe from any wild phase spending. They get full access from 18 to the ISA - luckily DD seems to have turned out pretty money sensible.:)

p.s if you have room in your isa I would put it there presuming its a S&S isa. Perhaps have a separate fund that is earmarked for them.

justme111

I am planning to do it. The main reason being it there by the time she starts working so that she has it embedded that she is supposed to contribute to some pension always (hopefully)

dunstonh

but not sure if it's a good idea or not.

its certainly not a bad idea.

but who knows when they'll be able to access it in the future.

Its a pension. So, we know they will get it in the pension age range. The earliest point will be 10 years less than the state pension age.

And if I did open one for them, not sure what to choose either. Possibly a SIPP with VLS100 or 80.

Most people go with stakeholder pensions for children/grandchildren. Low cost, simple and not much for an 18 year to get wrong when they take over the pension.

Alexland

@pip895 if you still plan to contribute past 18 and trust her not to incur the early withdrawal penalty then a LISA is a great option. She might be able to use it for a home purchase or gain access at 60 and use it to fill her SIPP in retirement until 75 under the current rules so get a double bonus on the same money.

I would limit your contribution to her LISA to 3k to match the inheritance tax rules and let her top-up the final £1k each year so she feels involved. The money would probably have to go as a gift into her bank account as the LISA provider may want to see it coming from her now she is an adult to satisfy money laundering requirements.

Alex

kidmugsy

Alexland wrote: »

I would limit your contribution to her LISA to 3k to match the inheritance tax rules

True, but remember that regular gifts out of surplus income are also exempt from IHT.

G4OJR

I took out a stakeholder pension for my 14yo because of the capped charges. Also I was uncertain about the compensation scheme limit on a sipp which appears to be £50k

TARDIS

Good to hear about other's experiences, thanks

dunstonh wrote: »

Its a pension. So, we know they will get it in the pension age range. The earliest point will be 10 years less than the state pension age.

but I worry that way things are going that may be nearing 80 for them!

Most people go with stakeholder pensions for children/grandchildren. Low cost, simple and not much for an 18 year to get wrong when they take over the pension.

Good point - I'd not considered the need for simplicity when they take it over, and probably something that doesn't encourage them to meddle with it too much - need to go research more about stakeholder pensions I think.

Was thinking I'd encourage them to move some of their JISA into a LISA when 18 to save for a first home and get the additional money from the government.

I'm hoping they grow up sensible enough to not blow the lot. They're good at saving at the moment and seem to understand the concept of delayed gratification in relation to money, but who knows what the future may bring. At least they can't touch a pension if they go off the rails!

dunstonh

Its a pension. So, we know they will get it in the pension age range. The earliest point will be 10 years less than the state pension age.

but I worry that way things are going that may be nearing 80 for them!

Well, good for them if it does go to 80. It means they are living that much longer. The state pension age is planned to be linked to life expectancy and the minimum commencement age to be 10 years under state pension.

Alice_Holt

I set up a SIPP for both my nieces.
So far so good - with c.£50k in each (They are now aged 18 & 23).
Chose growth orientated IT's - Scottish Mortgage, Fidelity Special Values IT, & F&C Global Smaller Co's.
Have lately directed my contributions into Vanguard LS 80 as a (slightly) lower risk addition.

It helps me with IHT planning (contributions out of income); is tax efficient; and will reduce the need for them to allocate scarce funds to pension planning in the years when they have their own family commitments.
I was lucky to have a DB scheme, uni grant, good job prospects, and affordable housing. - I'm not sure their future looks as beneficial!!

somethingcorporate

Alice_Holt wrote: »

I was lucky to have a DB scheme, uni grant, good job prospects, and affordable housing. - I'm not sure their future looks as beneficial!!

Given most of these things have gone the way of the dinosaurs then it's certainly not looking quite so beneficial.

Its great you've been so proactive and managed to contribute so much. I had never considered the IHT angle before either :T