Those that have no income including children can contribute a maximum of £3,600 gross per annum – that is you put in £2,880 and the Revenue will put in £720. This type of saving can also give your children an incredible boost to their retirement fund as well as being tax efficient for the parent.
What are the drawbacks to childrens pensions
The only drawback if there is one to children’s pension contributions is that benefits cannot be taken until age 55 which could be many years away. Pension experts though say that even one contribution can reap significant benefits at retirement for a child.
Many pension companies will put the childs pension in the parents name and then once the child reaches 18 years old the plan will revert to them and if they wish they can make contributions themselves. Once the child reaches retirement age (currently age 55) they can under current rules take 25% of the fund as tax free cash, with the remaining fund being used to purchase an annuity.
The tax advantages of pensions of course could change in the future and also you should consult an independent financial adviser as the charges on pensions between one provider and another can be significant and affect the growth of the fund.
Related Posts :
