Time is the most powerful factor in investing. Starting a pension at birth could give your child 50–60 years of growth.
1. The power of compounding
Even small, regular contributions can grow into a large sum thanks to compound interest. Investing say £100 per month from birth, could grow to hundreds of thousands of pounds by retirement age, depending on investment performance.
2. Tax relief on contributions
A pension for a child qualifies for basic-rate tax relief and you can contribute up to £2,880 per year; HMRC will top it up with 20% tax relief to £3,600*.
3. Financial head start for retirement
By starting early, you give the child a huge head start on their retirement savings. It may also mean they may be under less pressure to contribute heavily to their pension in their working years, giving them more flexibility.
4. Protected from early access
Regardless of contributions or age, the money remains locked until minimum pension age, which is currently 56 and rising to 57 from 2028, and likely to increase in future.
5. Potential Inheritance Tax (IHT) benefits
Although a parent or guardian needs to set up the pension, if grandparents or others contribute to the child’s pension, those contributions may fall outside their estate for inheritance tax purposes (if structured correctly).
6. Teaches financial responsibility
Once your child is older, they can be shown the value of long-term saving and investing. It creates a foundation for understanding how to manage money in the future encouraging good financial habits.
What happens when your child reaches 18?
At 18, the account doesn’t close or reset. Although a parent or guardian is still able to contribute (up to the same limits), ownership transfers fully to the child.
As an adult, they can now make their own contributions – up to £2,880 per year and receive the 20% tax relief, bringing it to £3,600 gross – even if they’re not earning. If they are earning, they can contribute up to 100% of their annual income, up to a maximum of £60,000 per tax year (as of 2026–27), with tax relief. This incudes contributions from them, their employer, any third party, as well as tax relief paid to the pension.
As an adult, they can also choose or change investments; nominate beneficiaries and withdraw once they reach retirement age, but the funds remain firmly locked until retirement age.
There are also other ways to save for your child’s future and taking financial advice will help you find the right balance to ensure your own future is financially secure. Why not get in touch to see how we can help.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and we are dependent on individual circumstances.
SJP Approved 08/04/2026