Funding for retirement is one of life’s major financial hurdles and it is possible to make tax efficient contributions of £240 each month into a pension for grandchildren (or children) to take this hurdle away from them. It’s a great way of gifting to children as they can’t touch the money until 55 so they can’t blow it at 18 on a sports car!
If you start at birth and continue contributing £240 pm until they turn 18, then they will have nearly £1.25 million in their pension fund by the time they are 60. This assumes a 6% pa return from the investments.
Summary: Gifting pension contributions for grandchildren is a very tax efficient way of passing assets on to your beneficiaries. The gift will be free of inheritance tax as it is paid out of regular income, the government will gross the contribution up by 20% within the pension (£240 pm gives £300 pm to the pension), all growth is free of tax within the pension and 25% of the fund will be able to be removed tax free from age 55.
Do you have Grandchildren and feel that you wish to gift them a head start? If you are interested in finding out more call us on 020 7467 2700.
This is only a case study and does not constitute advice. Anyone considering any form of financial planning should seek independent financial advice.
First Wealth LLP is an appointed representative of Best Practice which is authorised and regulated by the Financial Conduct Authority (FCA). You should note that the FCA does not regulate tax advice.