Junior ISAs

Three reasons why pensions are better than Junior ISAs for your kids

Jamie Smith, Partner at Foster Denovo, talks to Moneywise about the best ways to save for your children’s future and why he believes pensions are a better route.

In a world where the onus of ensuring financial security in retirement has very much moved from the employer to the individual, it is never too early to start the process of saving for your children’s future.

Of course, there are a number of ways that you could look to do this, a popular route being a Junior Isa (Jisa). However, we believe there are many reasons why a pension could be a better route.

This decision to start saving now could end up being one of the greatest financial gifts you ever give. Here are three reasons why:

1, Tax relief: The first big advantage is the generous tax relief on the pension contributions your child will get even though they don’t earn an income.

2.  Benefit from investment growth: If you invested the £2,880 a year contribution for 18 years, assuming an average net growth rate of 5%, your child would have £68,181 in their pension (in today’s money and assuming an inflation rate of 2.5% per year).

3. Limited access to their pension until they retire: A child pension is also appealing if you want to save for your child but you’re concerned about how they might use the money. Junior Isas, a popular choice when saving for children, gives children access to their money at age 18, when it becomes a standard Isa.

To read the full article on Moneywise, click here.