{"id":103739,"date":"2025-02-09T13:30:00","date_gmt":"2025-02-09T13:30:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=103739"},"modified":"2025-02-09T12:12:56","modified_gmt":"2025-02-09T12:12:56","slug":"tax-relief-martin-lewis-pensions-grow","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/tax-relief-martin-lewis-pensions-grow\/","title":{"rendered":"Tax Relief Benefits: Martin Lewis Explains How Children\u2019s Pensions Can Grow over Time"},"content":{"rendered":"\n<p>Personal finance expert <strong>Martin Lewis<\/strong> has issued an important message to parents and grandparents in the UK, emphasising the benefits of opening a pension for children. His latest advice suggests that even newborns can start accumulating retirement savings, thanks to tax relief incentives and long-term compounding benefits.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How Pensions for Children Work<\/h2>\n\n\n\n<p>According to <strong><a href=\"https:\/\/www.moneysavingexpert.com\/\" target=\"_blank\" data-type=\"link\" data-id=\"https:\/\/www.moneysavingexpert.com\/\" rel=\"noreferrer noopener\">Martin Lewis<\/a><\/strong>, anyone\u2014including children\u2014can have a <strong><a href=\"https:\/\/en.econostrum.info\/new-state-pension-rates-set-to-shock-millions\/\" target=\"_blank\" data-type=\"post\" data-id=\"8671\" rel=\"noreferrer noopener\">private pension<\/a><\/strong>, even if they have no income. The <strong>annual contribution limit<\/strong> for children is <strong>\u00a33,600<\/strong>, but due to government tax relief, it only requires a <strong>\u00a32,880 contribution<\/strong> from parents, grandparents, or other family members.<\/p>\n\n\n\n<p>Financial institutions confirm that these pensions function similarly to adult pensions:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Contributions benefit from <strong>20% <a href=\"https:\/\/en.econostrum.info\/council-tax-relief-dwp-benefits\/\" target=\"_blank\" data-type=\"post\" data-id=\"9258\" rel=\"noreferrer noopener\">tax relief<\/a><\/strong>, even though children are not taxpayers.<\/li>\n\n\n\n<li>Growth within the pension is <strong>exempt from income tax and capital gains tax<\/strong>.<\/li>\n\n\n\n<li>Control of the pension passes to the child when they <strong>turn 18<\/strong>, but they <strong>cannot access the funds until the minimum retirement age<\/strong> (which is currently 55 but expected to rise).<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">The Long-Term Benefits of Early Pension Contributions<\/h2>\n\n\n\n<p>One of Lewis\u2019 key arguments for opening a pension early is <strong><a href=\"https:\/\/en.econostrum.info\/uk-faces-looming-debt-crisis\/\" target=\"_blank\" data-type=\"post\" data-id=\"642\" rel=\"noreferrer noopener\">the power of compounding growth<\/a><\/strong>. The earlier the savings begin, the more time they have to grow. Grandparents, in particular, have taken an interest in setting up pensions for their grandchildren, viewing it as a <strong>long-lasting financial gift<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">Pls share with anyone its relevant to<br> <br>A warning to those age 22 or under. You may have \u00a32,000 in a Child Trust Fund.  You can access it for free. Yet some firms are trying to charge you to get your own money. Don\u2019t pay. Watch this instead\u2026 <a href=\"https:\/\/t.co\/0mtDUtxplT\">pic.twitter.com\/0mtDUtxplT<\/a><\/p>&mdash; Martin Lewis (@MartinSLewis) <a href=\"https:\/\/twitter.com\/MartinSLewis\/status\/1844301731355938940?ref_src=twsrc%5Etfw\" target=\"_blank\" rel=\"noopener\">October 10, 2024<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p>Lewis noted that many of his colleagues at <strong>MoneySavingExpert<\/strong> (MSE) have already established pensions for their children. While he recommends securing <strong>shorter-term savings options first<\/strong>\u2014such as <strong>Junior ISAs<\/strong>\u2014he sees pensions as a <strong>secondary but valuable<\/strong> financial tool for those who can afford it.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Balancing Personal Finances with Saving for Children<\/h2>\n\n\n\n<p>While encouraging parents and grandparents to consider pensions for children, Lewis warns that individuals should <strong>prioritise their own financial security first<\/strong>. He suggests:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Ensuring personal retirement savings are in order.<\/li>\n\n\n\n<li>Setting aside emergency funds and other essential financial protections.<\/li>\n\n\n\n<li>Using Junior ISAs for more flexible, shorter-term savings before committing to long-term pension plans.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">A Practical Rule of Thumb for Pension Savings<\/h2>\n\n\n\n<p>In addition to discussing children\u2019s pensions, Lewis also shared a <strong>guideline for adult pension savings<\/strong>. He suggests using this formula :<\/p>\n\n\n\n<p><strong>&#8220;Take the age when you start contributing to a pension, halve it, and that percentage of your salary should be saved annually.&#8221;<\/strong><\/p>\n\n\n\n<p>For example:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If you start at <strong>age 20<\/strong>, aim to save <strong>10% of your salary<\/strong> (including employer contributions).<\/li>\n\n\n\n<li>If you start at <strong>age 40<\/strong>, aim for <strong>20% of your salary<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p>While acknowledging that most people may struggle to meet this benchmark, Lewis stresses that <strong>starting early is the most effective way to secure a strong retirement fund<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key benefits and rules of children&#8217;s pensions<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Annual contribution limit for a child\u2019s pension<\/strong>: \u00a33,600, with only \u00a32,880 required from contributors due to 20% tax relief.<\/li>\n\n\n\n<li><strong>Who can open a child\u2019s pension<\/strong>: Parents or guardians, but <strong>anyone<\/strong> can contribute.<\/li>\n\n\n\n<li><strong>Tax advantages<\/strong>:\n<ul class=\"wp-block-list\">\n<li>20% <strong>government tax relief<\/strong> on contributions.<\/li>\n\n\n\n<li><strong>Tax-free growth<\/strong> (no income tax or capital gains tax).<\/li>\n\n\n\n<li><strong>Control shifts to the child at 18<\/strong>, but funds remain locked until retirement age.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Martin Lewis&#8217; savings priorities<\/strong>:\n<ul class=\"wp-block-list\">\n<li><strong>Secure your own finances first<\/strong> before saving for children.<\/li>\n\n\n\n<li>Use <strong>Junior ISAs<\/strong> for more accessible savings.<\/li>\n\n\n\n<li>If financially possible, a <strong>child\u2019s pension is a valuable long-term investment<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>General pension savings rule<\/strong>:\n<ul class=\"wp-block-list\">\n<li><strong>Half your starting age as a percentage of salary<\/strong> should be saved annually.<\/li>\n\n\n\n<li>The <strong>earlier you start, the more time compounding has to work in your favour<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong><a href=\"https:\/\/en.econostrum.info\/nationwide-virgin-money-customers-martin-lewis\/\" target=\"_blank\" data-type=\"post\" data-id=\"8331\" rel=\"noreferrer noopener\">Martin Lewis<\/a><\/strong>&#8216; recent guidance on pensions outlines a long-term financial approach that allows parents and grandparents to utilise <strong>tax relief<\/strong> benefits and benefit from <strong>compounded growth <\/strong>over time.<\/p>\n\n\n\n<p>Establishing a pension for a child at an early stage can contribute to future financial security. However, <strong>financial planning<\/strong> should take into account individual circumstances, with a focus on ensuring personal financial stability before allocating funds to a child\u2019s <strong>retirement savings<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Martin Lewis highlights how parents and grandparents can leverage tax relief to build long-term savings for children. Understanding the key rules can help maximise future financial security.<\/p>\n","protected":false},"author":9,"featured_media":103740,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46],"tags":[],"class_list":["post-103739","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-social-welfare","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/103739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=103739"}],"version-history":[{"count":2,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/103739\/revisions"}],"predecessor-version":[{"id":103759,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/103739\/revisions\/103759"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/103740"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=103739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=103739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=103739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}