Making pension contributions into a child’s pension can be an effective and tax efficient way of increasing the value of their inheritance, according to investment firm Skandia.
Putting money into a pension means the parent is securing the long term financial future of their children, especially where a child’s earnings may limit the amount they can currently save personally for their future. As the money is not immediately available, this removes the risk of their children ‘frittering’ away their inheritance. Instead they will have access to the money from the age of 55, when they could use the money to pay off their mortgage and help fund their lifestyle in retirement.
“Parents fortunate enough to have accumulated substantial savings may like to consider the best way to pass some of those savings on to their children,” said Adrian Walker, Skandia’spension expert. “Parents are likely to be more successful with estate planning if they start sooner rather than later, and pass on some of their intended inheritance whilst they are still alive, especially if they know they have savings which far exceed their foreseeable needs.”