Why you would want to start a pension for your grandchild
F&C Asset management calculate that it will cost £30,000 to
put a child born in 2007 through university.
Add to that the expense of getting onto the property ladder
- with an average of £16,000 needed for the deposit,
alone, according to Scottish Widow's Bank - and it becomes
clear that the current generation of under-fives, could
be in their mid-thirties before they get round to saving
into a pension for themselves.
Granted the government is proposing a national
pensions systems, but the current plans include
an opt out - and who can say that, given the other financial
pressures, their grandchildren would not opt out.
Its not all altruistic though.
Research has found that grandparents like the idea of locking
money up until their grandchildren are older.
There are concerns that handing money over when grandchildren
are younger could act as a disincentive for them going to
university or getting a job.
By providing money in the form of a pension, you have the
comfort of knowing you are helping relieve some of life's
financial burden when they are older, while not running
the risk of throwing them off course by handing over cash
when they are too young.
The research also threw up the issue of who can access
the money.
The growing instance of divorce apparently
means there are a lot of grandparents who want to make sure
their ex-son-in-law or daughter-in-law can not get their
hands on money they are putting aside for their grandchildren.
Only the person named on the pension contract
can assess the money inside it , so short of them dying
it will be their's and theirs alone to spend when they reach
55.
Taxing Trusts
Pensions are also a much more straight forward way of leaving money for
grandchildren to enjoy from a certain date, as they remove
the need for complicated trusts.
Here to, given the current Government's penchant for imposing
a tax charge on any money left in trust for children, beyond
age 18, a pension could make sense. As money inside a pension
pot rolls up tax free.
If you would like to speak to an Independent
Financial Adviser about setting up a pension for your
grandchild we can put you in contact with one here. Read
more
Setting
your grandchildren up with a pension
Reasons
for starting a pension for your grandchild
Stakeholder
Pensions and Grandchildren
Family SIPPs
and Grandchildren Pensions
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