Information on Pensions for Children
Under current pension legislation parents or grandparents can save up to £3,600 a year into a stakeholder pension scheme on behalf of their children or grandchildren. The main features of a child stakeholder pension are:
- Contributions attract tax relief e.g. based on an investment of £1,000 into a stakeholder pension for a child assuming they are a non-taxpayer or pay basic rate tax the government pays back 20%, making the sum invested £1,200.
- A parent or guardian or grandparent can set up a stakeholder pension and pay the contributions for any number of children under 18.
- The plan can be transferred from one pension stakeholder provider to another.
- The money is invested for the long term and cannot be accessed until the child reaches 55. This is a long term investment with good prospects of growth.
- Many stakeholder pension providers have a range of funds that can be invested in depending on requirements.
- There are rules on how pension benefits are taken e.g. Only 25% of the fund can be taken as tax-free cash.
If you are interested in examining stakeholder pension options for children or grandchildren, then it is advisable to discuss this with an independent financial adviser.
Other types of pension plans include general stakeholder and personal pensions, and Self Invested Personal Pensions (SIPPs), known as defined contribution schemes; and final salary or defined benefit occupational schemes.
For other children savings options see below: