For your family

Tax efficient savings opportunities

You may be able to pay up to £3,600 a year gross* into a Stakeholder Pension for your children/grandchildren even if they are not earning, and the contribution will benefit from basic rate tax relief.

So, under present tax arrangements, for each £1 you pay, HM Revenue & Customs (HMRC) will pay an extra 25p, even if your child does not normally pay income tax, assuming basic rate tax relief of 20%.

*If you want to pay £3,600 a year gross (known as the 'basic amount') into their pension pot, then it will actually cost you £2,880 a year, as the tax relief (assuming a basic rate of 20%) will increase your contribution to £3,600 a year.

For example

If you pay in £50 a month, the tax relief will increase your contribution to their pension pot to £62.50 a month.

Think about investing your child benefit

Currently £20.70 a week for the eldest child who qualifies, it probably doesn't go that far, but what about if you invested it?

Use the Children's Stakeholder Calculator below to see how much your child could retire on (this can include other contributions in addition to child benefit). It allows you to see the effect of investing your child benefit (or higher amount) on their behalf and/or paying in a monthly contribution. Once you have started them on the road to pension planning, the difference this headstart makes if they continue investing in the Stakeholder Pension plan could be significant.

This calculator assumes the pension pot is used to buy a pension income with or without taking a tax-free cash lump sum. There may be a wider choice of options available when the child takes their benefits. When the time comes, it's important they make sure the product they buy is suitable for their needs.

It's important to note that any money invested will be tied up until the child takes their benefits, which is normally from age 55 at the earliest, and that the value of their pension pot may fall as well as rise.

The law and tax rates may change in the future and the value of tax relief will depend on individual circumstances.

Children's Stakeholder Calculator

Details

 
 
 
 

Notes

Find out more

Visit our Stakeholder pensions website to find out more.

Help

Help: Child's current age

This is the current age of the child whom the Stakeholder Pension is for. If the child is under one year of age then please enter 0.

Back to Child's current age

Help: Retirement age

Benefits can normally be taken from age 55.

Back to Retirement age

Help: Invest child benefit?

This assumes that you invest £112.13 a month, which is currently the child benefit for your first child plus basic rate tax relief. This is payable until the child is age 16.

Back to Invest child benefit

Help: Invest a fixed monthly contribution

Enter the actual net amount you would like to contribute on behalf of your child until he/she is 18. The calculator will automatically add on basic rate tax relief at 20%. The minimum monthly gross contribution to our Stakeholder Pension is £20. This means that the minimum monthly net contribution is £16 (allowing for 20% basic rate tax relief).

There's no limit on how much you can contribute, however, there is a limit on how much tax relief your child can get. If your child has no earnings, or earns up to £3,600 in a tax year, you can contribute £2,880 net and get tax relief of £720, giving a gross contribution of £3,600. If your child earns more than £3,600 in a tax year, you can get tax relief on 100% of their earnings, up to the Annual Allowance.

If the total gross contributions paid by or on behalf of the child, into any UK Registered Pension Scheme are over the Annual Allowance, they'll be subject to a tax charge.

The Annual Allowance for the current tax year is £40,000. Where the total contributions exceed the Annual Allowance in a given tax year, unused allowances from the three previous tax years may be available (known as 'carry forward').

In some circumstances a reduced Annual Allowance may apply:

  • if their income (including the value of any pension contributions) is over £150,000 and their income (excluding the value of pension contributions) is over £110,000.
  • if they take money directly out of any money purchase (defined contribution) pension pot they have (they cannot normally do this until age 55).
The Annual Allowance will not apply in the tax year in which they die or if they take their benefits because of serious ill health.

More information is also available at gov.uk. You may wish to seek financial advice on this matter.

Back to Invest a fixed monthly contribution

Help: Anticipated fixed monthly contribution

Enter the actual net amount your child might like to contribute after they reach the age of 18. The calculator will automatically add on basic rate tax relief at 20%. The minimum monthly gross contribution to our Stakeholder Pension is £20. This means that the minimum monthly net contribution is £16 (allowing for 20% basic rate tax relief).

There's no limit on how much your child can contribute, however, there is a limit on how much tax relief they can get. If they have no earnings, or earn up to £3,600 in a tax year, they can contribute £2,880 net across all their pension schemes and get tax relief of £720, giving a gross contribution of £3,600. If they earn more than £3,600 in a tax year, they can get tax relief on 100% of the earnings they contribute up to the Annual Allowance.

If they're a higher/additional rate taxpayer, they can reclaim any further tax relief through their yearly tax return.

Tax relief does not apply to:

  • Transfer payments
  • Employer contributions
  • Any contributions on or after their 75th birthday.
If the total gross contributions paid by or on behalf of your child, into any UK Registered Pension Scheme are over the Annual Allowance, your child will be subject to a tax charge.

The Annual Allowance for the current tax year is £40,000. Where the total contributions exceed the Annual Allowance in a given tax year, unused allowances from the three previous tax years may be available (known as 'carry forward').

In some circumstances a reduced Annual Allowance may apply:
  • if their income (including the value of any pension contributions) is over £150,000 and their income (excluding the value of pension contributions) is over £110,000.
  • if they take money directly out of any money purchase (defined contribution) pension pot they have (they cannot normally do this until age 55).
The Annual Allowance will not apply in the tax year in which they die or if they take their benefits because of serious ill health.

More information is also available at gov.uk. You may wish to seek financial advice on this matter.

Back to Anticipated fixed monthly contribution

Help: Projected pension pot value at selected retirement date

This gives you an estimate of your child's future pension pot value in today's money, assuming inflation at a rate of 2.5% a year.

Back to Projected pension pot value at selected retirement date

Help: Monthly pension income at selected retirement date:

This gives you an estimate of your child's future pension income in today's money (allowing for inflation at a rate of 2.5% a year). This will be subject to income tax when they take this pension income.

Back to Monthly pension income at selected retirement date

Help: Cash lump sum

This gives you an estimate in today’s money (allowing for inflation at a rate of 2.5% a year) of the future cash lump sum value.

Cash lump sum

Help: Monthly pension income with cash lump sum

This gives you an estimate of your child's reduced future pension income in today's money (allowing for inflation at a rate of 2.5% a year). This will be subject to income tax when they take this pension income.

Monthly pension income with cash lump sum
 

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