Start a pension for kids

Malthusian

I have to ask whether anyone who is "stretching" to afford anything should be paying into a 6-year-old's pension. Pensions for kids are best taken out when you are absolutely certain that you already have enough money put by to pay their school fees, university fees, help them out with a house deposit, and absolutely everything else you might want to help them out with...

...and therefore there is nothing better to do with spare money you have earmarked for your child than pay it into something they won't be able to access until 58 (very likely later), albeit tax-efficiently.

People can still be financially irresponsible at 58.

Keep_pedalling

If you want to do this in addition to saving for more immediate financial needs such as university fees and getting on the housing ladder, then fine but if it means you cannot do the other things then forget it.

OldBeanz

Saved in a pension for my sons £16pcm. Could never afford private school for them all, the ones who went to uni got loans which they will not repay in full; they got a lump some at 21 some saved others spent; money set aside to buy house but first son does not want to buy yet but moved back in. As a teacher he can transfer the pension into the TPS so has decided to pay most savings into his pension for the first year. With tax relief and a couple of thousand from us he will buy £5,500 pa pension and he is also going to buy £6.6 pa extra pension rather than pay us rent. So by the time he is 30 will have saved more than enough money for a deposit when he may want to buy, will move job or abroad, will not pay any loan back and have an inflation proofed pension of circa £15k.
So don't assume that all will want to be lumbered with a mortgage or will act sensibly at 18/21.

cloud_dog

OldBeanz wrote: »

Saved in a pension for my sons £16pcm. Could never afford private school for them all, the ones who went to uni got loans which they will not repay in full; they got a lump some at 21 some saved others spent; money set aside to buy house but first son does not want to buy yet but moved back in. As a teacher he can transfer the pension into the TPS so has decided to pay most savings into his pension for the first year. With tax relief and a couple of thousand from us he will buy £5,500 pa pension and he is also going to buy £6.6 pa extra pension rather than pay us rent.

OldBeanz wrote: »

So by the time he is 30 will have saved more than enough money for a deposit when he may want to buy, will move job or abroad, will not pay any loan back and have an inflation proofed pension of circa £15k.

Hi, unsure if I am misunderstanding your post but you seem to imply that one son is putting as much as possible in to a pension together with contributions from yourself so that they have a large pot at age 30 to use to buy a property should they wish? (I've split the section in to two so as to give better 'focus')

Is that correct?

If it is then they won't be able to access the pension pot until 55 at the earliest and by then it may have increased to 57 at least.

Mistermeaner

just my 2 pennies; I'm putting 40quid a month into a sipp for each of mine (6months, 9 years and 11 years) that the government kindly top up to 50quid

We're doing OK but by no means loaded

Not disagreeing with any of the sentiment on here regards the pension being last down the list of stuff to save for re your kids but IMO its not a life changing amount of money to save but will I hope for mine give them a decent start in their pension but also I hope importantly enable me to teach them at a young age the importance of saving, particularly into a pension and to show them the long term growth effects of tax relief and compounding etc.

OldBeanz

cloud_dog wrote: »

Hi, unsure if I am misunderstanding your post but you seem to imply that one son is putting as much as possible in to a pension together with contributions from yourself so that they have a large pot at age 30 to use to buy a property should they wish? (I've split the section in to two so as to give better 'focus')

Is that correct?

If it is then they won't be able to access the pension pot until 55 at the earliest and by then it may have increased to 57 at least.

He has become a teacher. He can pay in any other pensions he has in the first year. He has £7k in savings and will save another £7k in the first 7 months. I will add £2k meaning his Stakeholder pension will be worth £30k which will bring him approx £5.5pa pension which increases at CPI +1.5%. He will not pay rent so in lieu of that will put the money into his pension which will buy him £6.5k pension. So after 5 years he will be looking to change jobs, buy or move abroad having saved the rest of his salary.
The point I was trying to make was that he does not want a mortgage at this stage in his life and sorting out his pension was extremely good value locking in £12k pension (plus the 3 he will naturally accrue) payable at 68 for £60k (family of long life so he should hit 100).
He then will make AVC contributions of circa £100pcm which will allow him to retire early.
Ambitions have changed for millennials and getting on the property ladder in their mid twenties does not suit all.
A child's pension is, as the poster above says, a good way of showing the benefits of compound interest and a lump sum at 21 does not always lead to the concept of buying a house as the average age to buy must be in the thirties.

AnotherJoe

OldBeanz wrote: »

Saved in a pension for my sons £16pcm. Could never afford private school for them all, the ones who went to uni got loans which they will not repay in full; they got a lump some at 21 some saved others spent; money set aside to buy house but first son does not want to buy yet but moved back in. As a teacher he can transfer the pension into the TPS so has decided to pay most savings into his pension for the first year. With tax relief and a couple of thousand from us he will buy £5,500 pa pension and he is also going to buy £6.6 pa extra pension rather than pay us rent. So by the time he is 30 will have saved more than enough money for a deposit when he may want to buy, will move job or abroad, will not pay any loan back and have an inflation proofed pension of circa £15k.
So don't assume that all will want to be lumbered with a mortgage or will act sensibly at 18/21.

All well and good but had you put the money into savings instead, he'd still have been able to transfer that money into a pension in the same way he's just done.

Whereas , by putting it in a pension to start with, that was the only option available. You were lucky it worked out OK but had he wanted to use it for a house or education or anything else he'd have been stuffed.

Bottom line is unless you've filled up things like ISAs, putting into a pension is a one way bet that closes off other options and offers little if any benefits other than to pension providers.

OldBeanz

AnotherJoe wrote: »

All well and good but had you put the money into savings instead, he'd still have been able to transfer that money into a pension in the same way he's just done.

Whereas , by putting it in a pension to start with, that was the only option available. You were lucky it worked out OK but had he wanted to use it for a house or education or anything else he'd have been stuffed.

Bottom line is unless you've filled up things like ISAs, putting into a pension is a one way bet that closes off other options and offers little if any benefits other than to pension providers.

Not at all; Giving youngsters (and yes they are still young even at 25) cash does nothing for them unless they are in a position to buy. I have money set aside to help with his house deposit but expect him to save money as well. He will not earn enough money this year to put £30k into his pension. More importantly he does not want the responsibilities and costs of a house while he is still building his career.
It is him that has seen the benefit of maximising his pension at an early age. Taking charge of his long term self.
Things have changed from our day when the most sensible thing was to buy a house (my brother managed with a little help with the deposit to buy one as a student in the early 70's) as soon as you could afford one. The main difference being that we could see inflation eroding the loan and had rising pay. This gives him the flexibility to work abroad or take advantage of other careers without having to worry about further major pension contributions. People are no longer buying houses in their twenties but seeing this as an opportunity to see the world.
In line with the old golf story of the more you practise the luckier you get I find the more I save the more people think I have been 'lucky' with my money.
As for money for education, I am doing my best by minimising my income through pensions to enable my kids to get as big a non-repayable loan as possible.
I think mistermeaner has summed up the benefits on top of this especially compound interest.

AnotherJoe

What do you mean "not at all"

In what way is locking someone into a pension better than giving them choice ?

Everything you said is irrelevant to the key point that locking someone up in a pension from ages (say) 6-60 is a poor decision compared to accumulating a sum that they choose what to do with aged 20, 30,40.

You cut that choice out. "Heres the money, look at it, you can't touch it for 40 years".
If that's what they want to do, that's their prerogative when they are old enough to understand. But you removed that abilty for him to choose. "What would you like to do with it, would you like a pension, a pension, or a pension?" when it could have been "would you like a pension, savings, a house deposit or allocate across all three? Your choice son"

Sea_Shell

Surely if someone wants to make a gift, of any description, it's up to the giver as to what form that is in.