Setting up a pension for a dependent may sound bizarre but there are many reasons why it’s a good idea:
- You can save money for your child’s future
- They have no access to the money until retirement
- They benefit from 20% tax relief
It makes perfect sense from an inheritance tax perspective too!
You could save up to £2,880 per year by doing so
If you open a pension for your child, you could save up to £2,880 per year tax-free. Tax relief on pension contributions at 20% means that the amount actually invested becomes £3,600. When the child reaches 18, they can continue to invest in it and access their pension at age 55.
If you’d rather put money aside for them to access when they’re 18 a Junior ISA could be the best option
A Junior ISA is a tax-free savings scheme that enables parents to put money aside either into a cash or a stocks and shares account for their child’s future. The allowance for the 2019-20 tax year has been increased to £4,368. On their 18th birthday, the child can access their savings.
If you’d like to talk to us about the best ways to invest for your child’s future, we’re always happy to help. Call us on 01494 614 636.
