Marvin OnumonuStandard Life, a part of Phoenix Group, has highlighted the benefits of investing in a child’s pension as a Christmas gift.
The analysis showed that diverting part of the average UK household’s Christmas spending, which is about £713, into a pension could significantly boost a child’s retirement savings.
Investing £300 each Christmas into a child’s pension from birth to age 18 could create a pot of £7,390 by age 22.
If grandparents match the contribution, making it £600 per year, the pot could grow to £14,800, adjusted for inflation.
With ongoing contributions and employment from age 22 on a £25,000 salary, following minimum auto-enrolment contributions, the £300 annual gift could result in a total retirement fund of £209,000 by age 66, an increase of £16,000 compared to not investing early.
If the annual contribution is £600, the fund could reach £225,000, up £32,000.
Dean Butler, managing director for retail direct at Standard Life, said: “It’s unlikely to be on anybody’s list to Santa, but investing into a child’s pension could be a present that lasts much longer than any toy.
“It may not be as tangible in the short term, but in years to come it’s likely to be something your child will thank you for.
“With people living for longer, and many shorter-term financial pressures along the way, future generations are at risk of not being able to fund their entire retirement.
Butler added: “To help set them up for the future, and if they can afford to, parents and grandparents could give their child a head start on their savings by opening a pension on their behalf.
“It offers a tax efficient way of saving and, once they’ve been set up, anyone can make contributions.
“This can give a young person a good nest egg for later in life, and by starting their savings early, they’ll benefit from a long period of compounding, whereby increases build upon themselves.
“Even if you only end up paying in for a few years, the pot could have many decades to grow in value.”
