Most people think of pensions as something that one establishes after entering the work force, either using a private pension program or one provided by an employer. Today, many people are rethinking the concept of the pension, and beginning to see it as a way to set their children on the path to financial security. There are several other compelling reasons why setting up a pension plan for your child is worth considering.
One has to do with taxes. By contributing to a self-invested pension plan or SIPP, your contributions are tax free, up to a certain amount each year. This makes the approach as practical as setting up an Isa for yourself. The difference is that you can contribute to the SIPP until your child is eighteen, and even if no further contributions are made over the years, the nest egg that is created will be significant.
Another has to do with teaching your child good money management. Since there is every chance that employer offered pension plans will continue to disappear as the years go by, it is important to impress upon your child the need to prepare for the future. By starting the pension plan now, you can encourage your child to also make contributions to the plan from time to time. This helps to establish a sense of ownership with the pension fund, and at the same time motivates the child to keep up the contributions in later years.
Take some time to look into the various self-invested pension plans on the market today. Chances are you can find one that will be ideal for your situation, and allow you to start teaching your child valuable lessons about finance now rather than later.
