Junior Pensions (SIPP) Tell me everything!

atush

i agree, I had 3 separate acvcoutns for my 3 boys. No1 made out well, but no2/3 didnt do so badly.

They all graduated debt free in the end.

AnotherJoe

Malthusian wrote: »

The problem with this approach from a fairness perspective (albeit there's no such thing as fairness) is that if you give GD1 half the combined pot when she turns 18 (or whenever you think she should have it), GD2 will get some of GD1's contributions and stockmarket growth.

Let's imagine that humans had a much shorter lifespan and that GD2 was born 2 years after GD1 and 2 years later GD1 reached the age of majority and you gave her half the pot. You'd've put in £400 for GD1 and £200 for GD2 but GD1 would only get £300. GD2 would in due course get the extra £100 that was originally intended for her sister.

Nothing changes if GD1 gets half the pot at 18 years instead of 4 except the fractions. If you invested £1,000 a year and growth was 2% over inflation, GD1 could expect £20k when the fund was divided in half on her 18th birthday and GD2 could expect £23k from the rest. If the funds were held separately then they would get £22k each.

GD2 also benefits more from stockmarket growth because part of GD1's half will have been invested for 16 years and part for 18, whereas part of GD2's half will have been invested for 18 years and part for 20.

Of course in reality the pot isn't going to grow at a steady rate, and the stockmarket might crash between the two 18th birthdays. But usually the stockmarket doesn't, and if it did you might delay passing on their money rather than cashing in at the bottom of the market.

Yes, you can divide unequally to try and even this up, but holding a separate pot for each grandchild saves you the bother of having to work out how to compensate for the fact that GD2 is getting a larger share simply because she was born later.

The problem with these points is the overall assumption that GD1 and GD2 get amounts relative to what i saved for them each, personally.



My perspective is not that at all, indeed I am trying to avoid that outcome. If i wanted that outcome I'd just save for each. And end up with what i dont want, the children getting very different outcomes, both monetarily and possibly overall in that one GD may not survive to get anything at all.



Its a general savings pool with the objective that each child gets roughly the same amount from what the investments overall generate, (but possibly adjusted for life events that may or may not be in their control)


If you like, a way of thinking about this is that the fact that i start saving when GD1 is born doesn't mean those savings are for her and her alone, that is just a logical starting point for saving for grandchildren overall.