Can I start a pension for my children?

child reaching for the sky

Sarah Austin of Independent Financial Advice firm Martin-Redman Partners comments on pensions for children, and some of the benefits and drawbacks they bring. 

So, can you start a pension for your children? The short answer is ‘yes’. Based on current rules, a child can have a pension from birth and parents (or grandparents) can pay £2,880 a year into their pension and still benefit from tax-relief. 20 per cent tax relief is added, taking the total to £3,600 contributed into the pension each tax year.

A pension is essentially a long-term savings vehicle in a tax-wrapper which benefits from the advantageous tax-treatment on contributions and the underlying funds it invests within. As with all long-term savings, which are invested into a range of funds benefiting from growth over time; your child’s money will benefit from compound interest - a very powerful tool!

To illustrate these effects; on a pension contribution of £300 per month (with £240 contributed by the child’s parents and £60 being added as tax-relief) this would generate a fund of:

  • £273,000 – equal to £129,000 in today’s moneys terms if contributions were made over 30 years
  • £522,000 - equal to £192,000 in today’s moneys terms if contributions were made over 40 years
  • £951,000 – equal to £273,000 in today’s moneys terms assuming contributions were made over 50 years

This assumes an annual return of 5.5% with inflation of 2.5% per annum, making the real return rate 3% before charges.


A major drawback of setting up a pension for a child is that they cannot access these funds until age 55 under current rules. Your child may need funds earlier than this, to fund university or for a deposit on their first home for example – their pension funds will not be available to them for these purposes.

However, it may be that this inaccessibility is also what makes it appealing to you as a parent looking to safeguard their child’s future retirement. Particularly so if you have concerns that your child may fritter away money that you’ve put into a savings account (such as a Junior ISA) for them, which they can access on their 18th birthday and spend as they wish.

When your child comes to take benefits from their pension, under current rules, 25% of the pension can be taken as tax-free cash, with the remainder taxed as income at your child’s marginal income tax rate. However, there is no certainty what the legislative and taxation rules will be several decades into the future.

Find out more

There are more complex tax considerations when which should be taken into account when deciding whether to start a pension for your child. We would recommend that you take independent financial advice on these areas, to understand the possible benefits and drawbacks, as well as other products that may be suitable, before proceeding.

If you would like to speak further; please contact Sarah Austin at or call her on 01223 792 196 to arrange an introductory meeting, at no cost to yourself. 


We provide independent financial advice on investments, pensions, inheritance tax planning and protection. We work with private individuals, businesses and professional introducers, such as accountants and solicitors, to ensure our clients financial advice needs are met.

Martin-Redman Partners