New baby: Is a SIPP the correct option?

ruperts

BoGoF wrote: »

@ruperts - but it's not ring fenced though is it. What would happen upon your death or divorce for example.

Thanks for the post, I hadn’t really considered these things in any detail.

If I die it’ll go to my child’s mother to use as she sees fit. In that case I’d rather the money be available to help with the cost of living for what would be, for a while at least, a one parent family rather than being locked up in the child’ SIPP.

In the event of divorce I like to think we’d have the good nature to respect the virtual ringfence, but I suppose anything could happen. That’s a risk I’m happy to take though.

Keep_pedalling

BoGoF wrote: »

@ruperts - but it's not ring fenced though is it. What would happen upon your death or divorce for example.

It could also be subject to IHT. Don't be such a control freak and put at least something in the child's name. If they have their own JISA you can use it to teach the child about investing so by the time they reach 18 they may be more interestied in continuing the investing habit than blowing it.

As for the OP it looks like we are talking about rather small amounts of money here, and I would not consider pensions unless I could first put away a substancial amount for more medium term needs like a house deposit.

justme111

another downside what if you need any means tested benefits ?
probably splitting it half and half or 25/75 so that the child learns about money management , makes mistakes but without catastrophic consequences ?
I certainly am considering a pension for my child . she is already 13 so not going to accumulate much but as a notion, ethics developing and a little help..I intend to go for cavendish for about £50 monthly - not going to be noticed by me and nit going to affect detrimentally any other planning.

louloubelle79

Congratulations btw x have you looked into a JISA? I have a JISA with One Family and CTF for my children, they also have a Santander mini acct in trust which pays 3% up to £2000. Just started to pay min into Legal and General pension for them both (age 8&6) as hubby and I only started (age 38!) hoping to give them better start then we did. We pay birthday money etc into Santander acct and pay small monthly into JISA/CTF. Ps Quidco give cash back for some JISAs etc

TheShape

ruperts wrote: »

If I die it’ll go to my child’s mother to use as she sees fit. In that case I’d rather the money be available to help with the cost of living for what would be, for a while at least, a one parent family rather than being locked up in the child’ SIPP.

Isn't that what life insurance is for?

ruperts

TheShape wrote: »

Isn't that what life insurance is for?

Yes but in that situation it wouldn’t hurt to have options. If my wife wanted to keep the money aside for our child she could do that. If she felt it was best used for another purpose she could do that instead.

cloud_dog

buel10 wrote: »

Hi all,
My wife and I are lucky enough to have a 4 week old baby girl. Friends and relatives have been so lovely and have provided presents and cash for the little one. However, I am very aware at how easy it is to use the money on baby stuff, etc so we have thought about putting it away in a bank account for the little one......but I remember reading an article about how investing in a pension for a baby as early as possible would likely reap so much over the years that I am interested in this.
My question - is a SIPP the correct option, and is there a minimum contribution?

Thank you all.

This subject has recently come up in the Savings and Investment board and my personal opinion is that a pension for a child is the lowest priority.

It really depends on your personal circumstances and whether you have sufficient disposable income and or capital. But, with most things in life it is rarely black or white. Our approach is:

1. Savings account in child name (bare trust). Will stop contributing when it gets to a certain level (tto much is often a bad thing)
2. S&S CTF (forerunner to JISA). We / grandparents deposited monies in this originally and this has done rather well and so no subsequant deposists have been made
3. DD (years older than your child) has a pseudo current account (debit card etc) where birthday/Xmas gifts go and she can spen as she wishes
4. S&S account on OH name, to be used for the benefit of DD, or gifted to her if appopriate This is where most of our ongoing deposits are made
5. S&S account in my name. This account is designated for either LISA (if still available) or pension

The reason for the two S&S accounts in mine/OH name is simply to distribute CGT and income tax considerations (it also allows my OCD side to have nice neat boxes of money allocated to specific areas)

I'm a firm believer in planning for flexibility in the future and whilst we have and are doing everything to ensure our DD is responsible and balanced with money there are no guarantees and this is why we are limiting the amounts that will, by default, become the responsibility of our DD. I do not think it is a bad thing for young people to 'struggle' with finances so as to understand the concept of 'do you need it?' (as opposed to want).

xylophone

Friends and relatives have been so lovely and have provided presents and cash for the little one.

If the money has been given to the child then it belongs to the child and should be saved or invested in the child's name.

You might look at JISA

https://www.gov.uk/junior-individual-savings-accounts

other child accounts

http://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

or a pension - if the child has no relevant income then you are restricted to a contribution of £2880 on which the provider will claim tax relief of £720.

A SIPP would be a possibility or a stakeholder perhaps.

kidmugsy

In the long, long ago, when I was a lad, to accumulated birthday presents in my Savings Bank account I added all my summer earnings as a schoolboy. So when I was 19 I could afford a motorbike. Hurray!

Seriously, hurray! Having personal transport enormously widened the range of university vacation jobs I could consider. Thank the Lord it wasn't all tied up in a pension.

TARDIS

buel10 wrote: »

Thank you for that. That tax relief sure is a bonus.
So is there a minimum contribution one can make / is there a set period, ie - monthly?

You can do lump sums or regular contributions, usually monthly.
Minimum contributions will depend on the scheme, often £50-100pm for SIPPs. Stakeholder pensions min are £20pm.

Costs will vary wildly. Probably best with % fees as you're talking small sums. Depends on what you want to invest in - SIPPs have a huge choice of funds etc. Stakeholder pensions are more simple, less temptation for tinkering in the future and free to exit.

The Aviva stakeholder pension via cavendish online is the cheapest one I could find when I last looked and probably what I will use for my kids unless vanguard offers something better next year.