New research has revealed the significance of helping your child or grandchild save for a pension from birth.
According to research by Skandia, if £240 a month (which equates to £300 a month gross contribution due to Government tax relief on pensions) was put into a child's pension fund from birth until they turned 18, when that child reached 60 they would be a millionaire.
This calculation is based on 6.5% investment growth per annum and no further contributions being made by the child.
Saving into a pension for children sometimes makes more financial sense considering that an inheritance lump sum would be liable to a 55% tax charge on death.
"If a grandparent has surplus pension income then this can be a wasted opportunity from an estate and tax planning perspective. By opening a pension for their grandchild, they can significantly improve the amount their grandchild eventually inherits," said Adrian Walker, Skandia's pension expert.
"Although the money is essentially locked away until the grandchild reaches age 55, once they do have access to the money, it can significantly boost their lifestyle, such as paying off their mortgage and providing a substantial income in retirement, something which will become essential as state support reduces."
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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