Savings

Financial Advisers Advice

Rather than use a child trust fund consider a payment into a stakeholder pension as this will ensure the 18 year old cannot be means tested under current law and also they don’t have access to cash at age 18. Consider therefore a 3 week old who receives a donation into their pension scheme from their grandparents. A contribution of £1,000 would only cost them £800 – an instant guaranteed growth of over 20%. This is down to the fact that the pension will attract tax relief.  It’s only recently that a child was allowed to open a pension, as previously there was a minimum age of 18. Contributions from all sources over the years could be paid into the pension, up to a maximum of £3,600 per year, costing only £2,880. Paying the maximum every year into the scheme would mean a total contribution of £64,800, which would have cost just £51,840 after tax relief.

Expert’s view: Score: 7 out of 10.

Good option given and good point about an 18 year old having access to cash – perhaps not a good idea.