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Year End Tax Review 2004

Children's pensions?

"Stakeholder pensions" are available to almost anyone, regardless of having earned income. A contribution of £2,808 will be "topped up" by a tax refund of £792 from the Revenue to the insurance company, even if the policyholder pays no tax at all. Stakeholder pensions are also supposed to have very low charges.

Some people who want to make long-term provision for their children are considering setting up such policies. Although the child will not see the money until the age of 50, an annual contribution of £2,808 from birth should provide a substantial fund by the age of 18 which would make a good start for the child's pension planning. The parent would not be subject to any inheritance tax on the contributions, so it would be more tax efficient than leaving a large legacy in a Will.