Traditionally we have put money aside for our children or grandchildren so that they have a pot of money to squander as they see fit when they are 18 or perhaps 21. We trust that they will put the funds towards their university fees or perhaps buying a home. Of course, the reality is that we have no way of ensuring that they do not spend on the important things in life like fun and travel. Now it may be that that is what you wanted, but are you really doing them the best turn you could with your money?
If you are of a certain age you will know that facing retirement without a significant pension is a scary place to be. You will also know that the state scheme will not keep todays pensioners in more than the everyday essentials. By the time a baby born today gets to retirement the state scheme will probably buy a loaf of bread and a pint of milk. Wouldn’t it be great if you could actually ensure your grandchild has a great retirement no matter how broken the state system is.
The pension rules allow you to invest up to £2,800 a year into a pension plan for the kid, this would with the tax relief be £3600 a year going into the plan. If you were to do this every year until they were 18 it would give them a pension pot of, depending on growth, about £1,000,000, thats one million pounds. A pension pot of this size would ensure a very comfortable retirement. With the pension taken care of they could do all sorts of exciting things with their money such as educating your great grandchildren.
The downside of course is that the funds are locked up until the child is 55 which is a long way away. Perhaps you would rather put less into a pension and perhaps combine it with something else such as a Junior ISA which would be accessible at 18. The point is that rather than going for the obvious you should take advice on all the options that are available.
If you would like to discuss what your options are, without obligation.