Pensions for children might not be the most exciting demand on your money but it is worth taking that step.
About 10 years ago we started a pension for each of our two daughters. It was just a modest amount initially and we have since added a little from time to time. We have been greatly encouraged by the Government adding 25% to the value of the money as it goes into the pension pot. It’s not very often our tight, mean minded Government actually pays out something like this so generously, so we suggest you take advantage before they change their minds!
For us, these are the benefits:
- your children are more likely to get into the habit of saving themselves. Already our eldest daughter has just said how she wants to retire early, just like us and recognises the benefits of starting to save early
- the Government’s Spreadsheet Phil adds at least 25% to the value of your contributions. How often do the Government hand money out like that? Did you know that? Grab it while you can!
- at the very least you will get some compound interest showing through as growth i.e. interest on interest
- it is nice to be able to hand it over when your children turn 18, in fact it can be a very special thing to do
- you can make it a surprise, or let them know before. We let them know early on but never made any real point of it until our eldest hit 18 which is when the significance was more understood
- you can select their retirement age i.e. when they can access it. We selected the lowest age of 55 to provide some flexibility,. I have pointed out I might still be alive when they are 55 and would like them to remember how we supported them, so they can look after us in our old age! Don’t think they were impressed!
- it is saving money which can’t be accessed early, so it can’t be blown on some ridiculous, useless sports car or a share in a lame race horse
- as a pension is a long term investment, you can be adventurous with the investment fund. By that I mean you can take a risk knowing there is time for short or medium term volatility to settle down. This means there is potential for very profitable and serious growth
- it will save their own financial advisors from trying to flog them a new pension
- it is another way in which you show your real love for your children