Forget that pink lady doll and the games console – a brand new pension is the gift of choice from financial advisers for their children, according to new research by financial software specialist 1st-The Exchange.
A children’s pension fund is the best present you can give a child this Christmas, said 31% of 175 financial advisers covered in the poll.
Other financial gifts popular with IFAs were premium bonds (27%), topping up a child trust fund (19%) and setting up or contributing to a children’s savings account (14%).
The remaining 9% of financial advisers opted to buy a lottery ticket for their child.
Children’s pensions
Given the miracle of compound interest, savings in a children’s pension and tax-free growth mean that the money you invest for your child in their early years can amount to a tidier nest-egg than what they will save themselves during their working lives.
Long-term returns on investment in the UK stock market have been around 11% per year since 1918*, which means that £25 per month invested for your child each month until they are 21 could return a massive £1.4m for them, as a pension pot, when they reach 60.
Investing the larger amount of £100 per month themselves from 21 until 60, on the other hand, would give them just under £697,000, due to the lesser time the capital is allowed to grow.
*Source: The Motley Fool
