Pension for Children

Published / Last Updated on 02/12/2014

Video explains why you should consider a pension for your child or grandchild given that they receive tax relief even if they are non-tax payers.

Transcript:

“Hello there, children’s saving series I'm covering here and the subject for today is pensions for children.

We all hear about junior ISAs and child trust funds and saving in things like that and premium bonds and friendly society plans and things like that but I'm introducing to you now the concept of saving in a pension scheme for your child, your grandchild, your children.

First things first, every single person in this country has a personal allowance. They are have a personal allowance for income so if a child is earning money, I don’t know they are a child's filmstar or something like that, then that income is potentially taxable and a child has a personal allowance, just in the same way as you and I do.

But what that also means is a child, because they are potentially subject to income tax, likewise they can pay into a pension scheme and claim tax relief.  Now even if a person, be it a child or be it an adult, is not working you can actually still pay into a pension scheme each year.  Currently, and I’m shooting this video in December 2014, currently an annual pension contribution limit of gross £3,600 per year.

£3,600 per year with basic rate tax relief is actually £2808. 2808.  So if you don't work or if your children don't work they can pay £2,808 into a pension scheme and receive tax relief, even if they’re non-taxpayers, and that grosses up to a total yearly contribution of £3,600 per annum.

So: you want to plan what is best for your children, you want to try and help them. There are two sides to this:

  1. Is using your child trust fund, if your child has got one of those or more recently junior ISAs but then once you've used up for example the £4,000 per annum annual allowance to a junior ISA what else can you do?
  2. Consider pensions because there’s free tax relief there. Pay in up to £2,808 per annum net of tax relief, the pensions company automatically add and claim tax relief for your child's pension scheme.

[And] I promise you if you did that and you saved into to a pension for your child from the day that they were born by the time they then reach adulthood. they get to age 18 or something like that. if you been paying a few thousand pounds per year and then that pension fund is left to grow from say aged 18 up to age 60/65 whatever it might be.  You will be staggered at how valuable that pension fund could be for your child or grandchild.  So there's an idea for savings for children: it's pension schemes for children.  Any questions, any problems or if you would like to talk about a pension for a child please do contact me.  Thanks very much for watching.”


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