setting up a pension for your child

Establishing a Pension for Your Child

havenifa

havenifa


Posted on: 8th March 2024

Everyone who has children has at some point said that they don’t want their child to experience the hardships they have had growing up and look at ways to safeguard their future by storing funds for that first car, university education, or first home. Raising a child is an expensive financial commitment as much as it is a life-changing element. Every year, the cost of birthdays and Christmas presents is much higher, and parties can cost upwards of hundreds of pounds – but are there better ways to provide a future for your child or grandchild? Investing in setting up a pension for your child could provide numerous long-term benefits – and securing a financially stable future for your child. Establishing a pension can also educate them about the importance of saving and investing for the future.

Child’s Pension

The decision of setting up a pension for your child is something that many parents have instigated in the 2020s. The financial uncertainty and changing face of the future and its prospects have fueled a panic to the point where parents struggle today to ensure their child has a fighting chance at a stable footing in the future.

Establishing a pension for a child can be done by a parent or legal guardian and can be established as soon as the child is born. If you are a grandparent wanting to help, the good news is that anyone can contribute to the pension – including godparents, relatives, and friends. As a parent, you will manage the pension saving plan until the child reaches the age of 18.

While the child gains control of the pension at 18, they cannot access the money until they reach the normal minimum pension age.

How Much Can Be Contributed?

Under current rulings, you can pay up to £2,880 into a child’s pension each year after setting it up. It will then receive basic rate tax relief, with the government boosting this to £3,600 with basic rate tax relief.

Most people setting up a pension for their child won’t pay much into it, instead making smaller contributions that will build up over time and benefit from tax relief. It may feel odd setting up a pension for a child when they are so young, but it will greatly benefit your child later in life when they are nearing retirement planning Cheshire.

It will also help with the amount they may contribute to their pension during their lifetime, potentially allowing freedom to put money to fund major life events such as marriage or buying a forever home.

Providing a boost to your child’s future is a worthy cause to protect them against future financial burdens. Pension advice Manchester is best sought from independent financial advisers Cheshire who can inform you of the best practices and options available to you.

Contact the team at Haven IFA today for more information on pensions for your child.