Should we invest in a pension for our young daughter? |
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Source: Financial Mail Women's Forum, November 6th 2010 I would like to secure my 5 year old daughter's future by buying her a pension plan and making regular contributions until she can afford to do so herself. My husband is against this idea - he says there is no guarantee of anyone reaching old age and we should put into a childhood investment instead. What do you recommend? - Frances, Surrey What we would recommend would generally depend upon the amount you have available for investment. Pensions are certainly attractive as they provide tax relief giving an immediate uplift on contributions up to£3,600, even though your daughter is not a taxpayer. The disadvantage, however, is that your daughter will not be able to access this pension until 55 (under current legislation and this may increase further in future). Your daughter is probably more likely to need access to capital when she is at university or buying her first home so I would generally suggest that a shorter term investment is used in the first instance. For regular investments, you could consider using a unit trust (possibly within a bare trust for your daughter's benefit, although you should seek advice on the implications of this). This is likely to provide far more flexibility than a pension and still be reasonably tax efficient, even though it does not benefit from initial tax relief.- Lesley Collins, Chief Executive, Edinburgh based investment consultants Independent Women
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