Savings for grandchildren
Setting your grandchildren up with a pension
Intro
Human nature, means that most of us want to help our families
to a more secure future. While it might not be as exciting
as this year's must have Barbie or iPod, setting
your grandchildren up with a pension could be the
one gift they remember you most fondly for.
Everyone knows that the sooner you start
a pension, the more you eventually have to play with.
So why wait for your grandchildren to grow up and start
earning a living to nag them to start a pension. You can
do it for them now, and it might with time, turn out to
be the best Christmas, or birthday, gift you ever got them.
There are two ways for grandparents to contribute to a
pension for their grandchildren.
The first, and most straight forward, is through a stakeholder
pension, alternatively a family
SIPP could be used.
Regardless of which route you take, the earliest your grandchild
will get their hands on the money in the pension fund you
set up, is when they are 55.
Stakeholder Pensions and Grandchildren
If you opt for a stakeholder pension you can put in either
a lump sum, or regular monthly amounts up to £3,600
a year.
Whatever you put in, time and what is known in financial
industry speak as “compounding
interest ” can work wonders.
A, one off, £3,000 lump sum put in its managed stakeholder
fund for a child born in August 2007, would be worth £133,000
(assuming an intermediary growth rate of 7%) by the time
they hit 65.
Even if you want to go against the historical evidence
that equities outperform all other asset classes
over time, and stick it in a cash fund (so its
basically a savings with pension rules wrapped around it)
that same £3,000 lump sum would be worth £37,700
(assuming a rate of 5%).
Read On
Reasons
for starting a pension for your grandchild
Stakeholder
Pensions and Grandchildren
Family SIPPs
and Grandchildren Pensions
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