Savings account for our newborn

hugheskevi

I wouldn't be attracted to pension contributions for a child unless a junior ISA has been maxed out (as a minimum).

A pension contribution would receive basic rate relief, uplifting the contribution by 25%. It is very likely that withdrawals in the distant future will be taxed. If future withdrawals are taxed at the current basic rate (20%) the value of the pension contribution is a net uplift of 6.25%. But if the tax rate on withdrawals is 27% or more (assuming 25% tax free lump sum remains in place), putting the money into the pension would create a financial loss. Taking into account the money could be withdrawn at higher rate tax, even in the absence of policy change there is a high risk that money into a pension could be a financial mistake.

There is also the likelihood that the child could in future make their own pension contributions far more tax efficiently. They might have salary sacrifice available, or higher rate tax relief, or benefit from higher means-tested benefits such as Universal Credit, Child Beneift, or free child-care. In any of these cases, they could use money in an ISA for living costs, and redirect salary into pension for a better outcome compared to money into a pension as a child.

I just don't think that a 25% uplift on contribution (likely to be a net benefit of 6.25% but very uncertain) that will be subject to future taxation and is inaccessible for about 60 years is adequate compensation for the loss of liquidity and inherent uncertainty of value.

singhini

You have been very clear in your post "short to mid"
I too was clear in my original post "medium to Long" - but you gave that no consideration. There never was a need for your initial criticization of my post, the OP is free to take or leave my comments. 

You still haven't answered the question what are these government changes for the next 60 years your concerned about?