Children's pension

Guide to pensions

What do I need to know about a children's pension?

• You can open a pension for each of your children.
• The government automatically refunds tax on savings of up to £2,880 per year, per child.
• Other relatives (e.g. grandparents) can also contribute.
• When your child turns 18 they become the owner of the pension, they can continue to contribute or leave the savings invested.
• They can access the savings from age 55.

You can start saving with small amounts and because of the tax advantages, and the growth potential of the stock market, even modest amounts can add up.

Tip: Even small amounts add up over time.

What are the tax advantages?

One of the main benefits of saving in a children's pension is the tax advantages.

Your child benefits in two ways:

• The taxman tops up payments you make.
• While your money is invested any growth in value remains tax-free.

You can open a pension for each of your children, and for each child you can save up to £2,880 tax efficiently per year.

The government will automatically top up the pension pot by 25% (e.g. turning £2,880 into £3,600). Contributions over £2,880 are allowed but receive no tax refund.

Contributions into a child's pension has no impact on your tax status.

If your child has their own relevant UK earnings then they may be able to receive a tax refund on higher amounts. Speak to us for details if this applies to them.

Why act now?

The sooner you start putting money into a pension the more your contributions add up and delays can cost a surprising amount.

• Even small amounts add up over time.
• Starting just one year earlier can make a big difference.

For an example of what the cost of delaying your pension could be go to unbiased.co.uk

Please bear in mind, that this is an educational tool only, and an unadvised generic guide. The assumptions and figures do not reflect your personal circumstances and are not a guide to future growth.

How much should I save for my child?

Although its designed around adult pensions, you can use the Money Advice Service's pension calculator to get an idea of what your savings could grow to. Just enter your child's details.

Find out more - visit our Pension calculator page

How can my child access their pension savings?

When your child reaches 18, ownership of the pension switches from you to them. They can start paying into the pension if they wish and all correspondence, such as statements, will start being sent directly to your child instead of you.

The earliest your child can currently take their pension is their 55th birthday. Although this age may change in the future. Although the rules are likely to change by the time your child retires, their options would currently be:

• Withdraw all their savings – up to the first 25% is tax-free.
• Leave their savings untouched until they need them – they could continue to grow in the meantime.
• Use their pension pot to buy a secure retirement income, typically known as an 'annuity'.
• Transfer free of charge to another pension provider useful if you are combining pension pots or they want withdraw cash as and when they need it.