Child SIPPs could turn babies into millionaires

01 February 2012 16:01:04

Child SIPPs can provide comfort in retirement.

Parents could help turn their children into pension millionaires by contributing to a child self-invested personal pension (SIPP) instead of a regular savings account, it has been claimed. Alliance Trust Savings has calculated that by paying just £83 per month into a child SIPP, parents could help their offspring become millionaires by the time they reach retirement age - as long as the child continues to contribute as an adult. Here, we take a look at SIPPs and how they could be an ideal product for parents wishing to save on their child's behalf.

What is a child SIPP?
A child SIPP allows parents to save towards their youngster's pension, providing financial benefits many years down the line. SIPPs allow parents to contribute up to £2,880 net per year on behalf of their child, with basic rate tax relief boosting their investment to as much as £3,600. Unlike with traditional savings accounts, where the funds can usually be accessed with little or no notice, the funds invested in a child SIPP cannot be touched until the person is 55 years of age.

How much could your child benefit?
Parents who regularly invest in a child SIPP could actually help their children become millionaires in later life, according to SIPP provider Alliance Trust Savings. The savings expert calculates that contributions of just £83 per month or £960 per year could ensure the child has a pension pot of just over £1m by the time they retire, assuming they take over the contributions at age 18.

Parents urged to consider child SIPPs
Steve Latto, head of pensions at Alliance Trust Savings, said child SIPPs should therefore be a "major consideration" for parents who want to help their children in the future. He pointed out: "It is unlikely that the children of today will benefit from the generous pensions provisions that were seen in the past from both the state and private employers, and as such parents should carefully consider a child SIPP as a way of helping their children to plan for a comfortable retirement."

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