Baffled by child pensions...

AnnaJJ

Hi all,
A (much more financially savvy) friend suggested I consider opening a pension for my 7yr old, saying the extra decades of interest would be a helpful cushion for when he eventually retires. This sounded sane to me, but now I've started looking and I'm rather out of my depth. I'm not confident in choosing where to invest (i.e. clueless), so I'd rather have something that looks after itself as much as possible, but I can't work out what the options are nor if it would mean there'd be fees attached. If anyone can point me to some advice on how to compare different options, or things to be wary of, I'd be very grateful (my googling isn't proving very successful - I could well be using the wrong search terms!)
I have my own pension through my employer, and have always blindly followed my Dad's advice from when I was 18 - "put as much as you can afford into your pension!".

Thanks in advance!

Bravepants

Hi, it's great that you are thinking about your child's future. But have you considered he may want a deposit for a house one day, and to have a load of cash tied up until he is in his late 50s may not be much of a help to his early years when he is trying to get established in life, job/career, home, marriage, kids of his own etc.

Here's a useful link I found after a quick search:

https://www.ftadviser.com/pensions/2018/05/09/danger-of-children-s-pensions-laid-bare/

Bravepants

This is NOT advice, but if I had kids I'd open one of these:

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-junior-isa

Selecting this as the only fund:

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-accumulation-shares

and drip feed monthly.

By the way, it would be up to you to guide him away from blowing the money on a sports car/motorbike/massive drunken bender/women or men!

It would be HIS money from the age of 18 and no-one will be able to access it until then. But it should give him a good start in life.

Albermarle

I have my own pension through my employer, and have always blindly followed my Dad's advice from when I was 18 - "put as much as you can afford into your pension!".

Your Dad's advice is not bad but there should be a second part to it.

' and make sure the money in the pension is in the right kind of investments within the pension, for your situation/age/risk tolerance '

That's assuming your pension is a standard DC workplace pension . If you have a final salary pension ( lucky you if so ) then you can ignore the above.

Marcon

Your son will always have other spending priorities, calls on his (your!) cash, etc and his enthusiasm for pensions probably won't start developing for many decades yet. Open a simple stakeholder pension and invest some modest savings in the default option.  Easy to do online (although not right now, because of Covid19) and the cheapest to open: https://www.cavendishonline.co.uk/stakeholder-pension 

OldBeanz

I managed £20 pcm for my son. It allowed him to buy extra pension when he became a teacher, transferring it in during the first year which he would not have been able to do with any equivalent savings. He learned the benefits of saving, compound interest and also understands his pension more than most. The inflation proof pension (cpi + 1.5%) he bought would cost circa £66k if buying an annuity at his state pension age. We also have other savings for him.