Moneywise (19/09/2018) – Setting up a pension for your child will help set them up for a wealthier retirement, is very tax efficient and helps introduce them to the concept of long-term saving. So why don’t more people do it?
When is a pension not just a boring pension? When it helps to introduce your child to the concept of long-term saving
There are many ways parents, grandparents, godparents and family friends can help secure a child’s financial future.
There’s a lump sum towards a house deposit, a savings account, a Junior Isa (Jisa) or even Premium Bonds.
Such gifts are incredibly useful, but some parents are adopting an even longer-term view. One they believe will encourage their youngsters to take more control of their finances into adulthood – that is, setting up a pension.
Up to £2,880 per year can be paid into the pension of someone under 18, and it is estimated that over 60,000 children now have one, according to figures from HMRC.
And some parents are starting early – Nathan Long, senior pensions analyst at Hargreaves Lansdown, says 7% of all pension accounts it sets up for children are for newborns.
Installing an appreciation of delayed gratification is only half the appeal, though. Alan Chan, a chartered financial planner at IFS Wealth and Pensions, says parents are using their child’s pension to help show the power of long-term investing.
He explains: “Using apps such as 7Imagine means children can actually see their investments rising and falling each year.
“By the time they are working and investing themselves, it will no longer be alien to them. Using an app also provides a great visual plan, in fact IFAs use a more detailed equivalent when modelling their clients’ finances.”
Full article link: https://www.moneywise.co.uk/pensions/start-pension/should-you-start-pension-your-kids
