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Can a child have a pension ?

You may be surprised to hear that the answer to this is yes. It may not be very common yet, but it is now possible for children to have a pension. There are a few different options, but the most common is a Stakeholder Pension fund. A child's pension can be opened from as little as £20 and you can pay in up to a maximum of £2,808 per annum net of income tax in a single tax year. Like an adult's pension it attracts tax relief, boosting the total paid into the fund in a year to £3,600 based on a contribution of £2,808.

The children's Stakeholder Pension can be opened by anyone who is interested in the child's future. Even god parents, aunts and uncles can open an account. As long as the legal guardian of the child is aware the payments are being made, anyone can contribute.

The benefits of taking out a pension for your child are numerous. Unlike schemes such as the Junior ISA or Child Trust fund, a child cannot withdraw any of the money until they retire, giving the fund a lengthy investment period to allow it to accumulate. This is an attractive reason to open one when the child is very young.

The incentives for you:
• You have many years to build up a substantial fund.
• Any payments that you make are tax-free which gives the pension even more value.

The children's Stakeholder Pension is very flexible indeed. You have full control over any premiums, in terms of when to start and stop them, as well as lump sums which can be paid in at will.

The benefits for the child:
• As they cannot access it, the funds cannot be wasted during their youth.
• When they have settled down they can concentrate their own funds on other things like wedding costs, a car, or providing for their own children.

Of course, not being able to predict the future, there may be a few encounters along the way. No-one knows how many different heads of government Britain will have in the next 50+ years. This may mean several changes to the existing pension schemes, and it's possible that some kinds of pensions may be discontinued. With this in mind, it's recommended that any plans taken out are reviewed by a qualified adviser, regularly, over the life of the policy and not just at the start.

There are a number of companies who can provide you with a children's Stakeholder Pension. Speak to one of our financial advisers to get advice on which one is best for you.

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