Tax relief on your childs pensions contributions (Virgin Money Stakeholder Pension)

Member Name: bucksfizz66

Product:	Virgin Money Stakeholder Pension
Date:	08/06/09 (122 review reads)
Rating:

Advantages: Low charge, flexible payments and can be start and stopped plus tax relief

Disadvantages: The website calculator helped to sell it

I hold a stakeholder pension on behalf of my daughter. A change in the pension rules about 7 years ago brought about the stakeholder pension enabling women who didn't work to start a pension fund; the change also created a loophole that enabled even babies to have a stakeholder pension fund in doing so despite not working and not paying tax they are still eligible for 20% basic tax relief on contributions made into the pension. So pay in £40 and it gets topped up to £50.

At the time my daughter was born I read about this in a finance magazine and decided to do some research - I settled on Virgin because their website has a page specifically dedicated to Children's pensions.

I would say only do this if you are prepared not to see the money for a long time - your child won't be able to access it until they are 55, so it's a long term investment. There is an annual charge for managing the pension but this is only a flat rate of 1% at present.

Payments into the pension are completely flexible so you can pay in what you want every month and you can stop and re-start payments when you want. The tax relief though is only on payments that reach the annual personal tax allowance (so once £3,600 for year 2009/10 is reached including tax relief; at that point no more tax relief can be gained). Any relatives can contribute to the pension - it doesn't have to be just the parents, so like the child trust funds in that respect.

The website used to have a pension calculator (not anymore) based on this I started my payments at £20 a month and agreed to increase them by 10% a year as this gave a better projection. The money markets are a volatile place and this maybe isn't the best time to talk about pension funds but you are in this one for the long haul so in the world of money there is plenty of time. Ownership of the fund transfers to your child when they become 18.

I have never had any cause for complaint with the Virgin fund. It something that just sits behind the scenes in the hope to provide a pension fund for my daughter in a world where the demographic ages and the likelihood of the state pension disappears.

Summary: A long term investment that could help your child