With the introduction of pension auto-enrolment in recent years, the UK government has made a real effort to encourage people to take control of their retirement saving plans.
Less known however is the fact that the government will contribute up to £720 every year to pensions for children too.
Everyone between the age of 0 and 75 is entitled to contribute up to £2,880 into a registered pension scheme even if they have no earned income. The government will then add a further 20% on top, up to a total amount of £720, making a combined contribution of £3,600.
This is something that every parent and grandparent should think seriously about if they have sufficient surplus funds available to them.
Even with no growth, a child who had a pension funded for them in the year they were born would have £64,800 in their pension by the time they reached 18 years of age, of which £12,960 would have been contributed by the government.
Due to the relatively small amounts involved, financial advisers tend not to arrange pensions for children but there are a number of internet based platforms that offer an easy way to set up a child’s pension online.