How Do I Start a Pension for My Child - The Daily Telegraph, 30th September 2025

Jason Discusses What to Consider When Starting a Pension for a Child - with Esther Shaw for The Daily Telegraph

The original article was published on telegraph.co.uk on 30th September 2025.

As part of our mission to empower as many people as possible to make better financial decisions, we have published below all the information Jason shared with them, so you get the maximum benefit from it (not just from what was published).

WHY OPEN A PENSION FOR A CHILD

The reason parents might generally do this is if they were already in a very solid financial position themselves, were already using up all of their own pension and ISA savings allowances, still had plenty of spare money left over and wanted to do something else that felt tax-efficient. 

Unless you are in a very strong financial position yourself, we can’t really see much logic in paying money into your young child’s pension. Instead, most people would be better off focusing on securing their own financial position as parents and then giving their children money in their adulthood, as and when they need it, rather than tying it up for what could be more than half a century. 

Grandparents are also welcome to pay into a grandchild’s pension. The motivation for grandparents is usually different as it is almost always to do with their own Inheritance Tax planning strategy.  On paper, this can make it look very attractive – save Inheritance Tax, get basic rate tax relief and then achieve tax-efficient, compounded returns for 50 years or more. However, the lack of accessibility will be unpalatable for some and there will most likely be tax to pay when the pension is eventually drawn on.

HOW MUCH CAN I PAY IN?

Most of the major pension platforms have a junior pension facility so it is easy to set one up online. 

Most young children have no earnings and therefore contributions are limited to £3,600 gross per annum. This equates to £2,880 net of basic rate tax relief. In other words, you can pay in £2,880 and the Government will top this up by £720 to £3,600.

JUNIOR ISA v PENSION

The main advantage of a Junior ISA over a pension for a child is around accessibility. Whilst a Junior ISA will be accessible at age 18, your child or grandchild won’t be able to touch their pension until at least age 57.  

You could argue that the pension option means that there is no risk of them doing something silly with the money when they turn 18. 

It depends on your perspective but we find it a bit strange to tie money up for half a century or more. A lot could change in that time. Whereas money in a Junior ISA might help with university funding or getting on the property ladder, money in a pension won’t be available for that.

Many might see the main advantage of a pension over a Junior ISA as the tax relief that you get at outset. Subject to an annual contribution cap, money you pay into a pension for a child or grandchild will attract an immediate basic rate tax uplift. However, given that the pension is likely to suffer income tax when it is eventually drawn on, a pension may end up being only marginally more tax efficient than a Junior ISA with far less flexibility and liquidity. 

GET IN TOUCH

If you would like to discuss any questions you have around setting up a child pension, or any other help you need to plan your own financial future, please call us for a free consultation on 020 3488 9505.

The value of your investments can go down as well as up, so you could get back less

than you invested.

Tax and Estate planning is not regulated by the Financial Conduct Authority.