Most people probably don't think of a pension when they think about saving for their children and they would not be able to take an income from their pension until they are 55 compared to a Junior ISA that gives access at age 18. But if a parent saves the maximum £3,600 each year, even without any growth they would have accumulated £64,800 by the time their child turns 18.
Statistics from the Department of Work and Pensions at the end of 2010 revealed that more than ten million people alive today will reach the age of 100. Of the ten million people set to become centenarians, over three million are currently under the age of 16.
Many of those under 16 are expected to live to 110 years of age. Assuming these individuals want to retire at 65 they may have to fund up to 45 years of retirement. Previous generations often did not live long enough to see their children reach retirement age but with these changes in life expectancy, more and more parents will see their children live into old age. The financial security of their children is unlikely to become less of a priority but, by this time, they may be less financially able to support them.
Non-earners including children can contribute £3,600 gross per year to a pension. This means a parent or grandparent could make a contribution of £2,880, which would be topped up by basic rate tax relief of 20% to £3,600. Experienced IFA’s Enable can help you consider your options.
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