Savings for Uni - Via Pension or JISA

NorthernMonkey1

Hello all,
I'm looking to save some money to pay for my child to go to university. She is currently 8 months, and I am 41. 
I have 2 options, to pay into a Junior ISA. This is what I have been doing for the last 8 months, a Junior ISA, from Vanguard, buying Lifestrategy 100
The other option is to instead pay more money into my pension (a salary sacrifice pension) I'm a 40% tax payer. 
If I increase what I pay into my pension, instead of after tax payments into a Junior ISA, then withdraw this money, with 25% tax free, when I am 59 (her 18th Birthday) then this could be significantly more tax efficient. I could pay an additional £166 into my pension, for every £100 I pay into her JISA, then withdraw this at a 20% tax rate when retired at 59.
Are there any disadvantages to this approach?

Zorillo

If you put it in a JISA you lose any control over what she does with it at 18. She might want to spend it on university costs, but she might not.

We're using JISAs for our children, but with future house deposits the long term aim. Of course they might decide to spend it on beer and football, like I would have done, in which case I'll be able to say I tried.

Steve182

No disadvantages in your plan to invest it in the pension that I can see...except nobody knows what the minimum age will be for pension withdrawal 17 years from now. However I would guess it's unlikely to be much older than 60, so personally I would put it in the pension. 

kinger101

The pension is the most tax efficient option.  With SS, every 58 pence you put in, you effectively get 85 pence out, which is a 46.55 % gain off the bat (It's not really £1 out, as the other 75% will be taxed at your marginal rate).
The other advantage is you'll retain control of the money.  A JISA becomes the property of the child on their 18th birthday, and if they'd rather spend it on a motorbike and tattoos than education, there's nothing you can really do about it.

The major downside is that there's not two ring-fenced pots.  

colsten

Steve182 said:

No disadvantages in your plan to invest it in the pension that I can see...except nobody knows what the minimum age will be for pension withdrawal 17 years from now. However I would guess it's unlikely to be much older than 60, so personally I would put it in the pension. 

Yes we do know what the minimum age will be - it will be 57 from 2028, and then 10 years less than state pension age. As state pension age won't be higher than 68 in 17 years, the OP can withdraw a lumpsum at 59.

However, and sorry if this sounds a bit morbid but it has to be considered: what if the OP passes away before 59? Is the daughter a / the beneficiary in the pension plan? Is there a life insurance?  What if the OP lives to at least 59 but then passes away within 7 years of having gifted the daughter the money at age 59? Will IHT become due on the gifted money?

I would see an IFA if I were the OP, for some proper personalised planning.

Steve182

colsten said:

Steve182 said:

No disadvantages in your plan to invest it in the pension that I can see...except nobody knows what the minimum age will be for pension withdrawal 17 years from now. However I would guess it's unlikely to be much older than 60, so personally I would put it in the pension. 

Yes we do know what the minimum age will be - it will be 57 from 2028, and then 10 years less than state pension age. As state pension age won't be higher than 68 in 17 years, the OP can withdraw a lumpsum at 59.

However, and sorry if this sounds a bit morbid but it has to be considered: what if the OP passes away before 59? Is the daughter a / the beneficiary in the pension plan? Is there a life insurance?  What if the OP lives to at least 59 but then passes away within 7 years of having gifted the daughter the money at age 59? Will IHT become due on the gifted money?

I would see an IFA if I were the OP, for some proper personalised planning.

We know today what the minimum planned age will be 17 years from now. We also know successive governments never change those plans.......don't we?

How many different governments, chancellors, budgets, Covids, wars will we have before 2039?

Alexland

colsten said:
Yes we do know what the minimum age will be - it will be 57 from 2028, and then 10 years less than state pension age. 

The government's consultation to increase the NMPA to 57 is proposing that members of schemes with an unconditional right of access at 55 on the day the consultation was published could get a protected retirement age of 55.
https://forums.moneysavingexpert.com/discussion/6240982/increase-to-minimum-pension-age-from-55-to-57-new-hmt-consultation/p1
Those of us wanting to retire as soon as possible should avoid doing transfers involving such schemes until the rules become final and understood.