Children set to retire with pension pots of £1.75m

Alliance Trust Savings, one of the country's leading SIPP providers, has revealed that more than a third (34%) of their Child SIPPs received the maximum gross contribution of £3,600 in the tax year 2010/11.

By paying the maximum gross contribution of £3,600 into a Child's SIPP each year from  birth to age 18 years, the child's pension could be worth £1.75m* by age 65.  And if the child continues to make contributions during their adult life their pension fund could be worth significantly more at retirement.

Child pensions can receive net contributions of £2,880 per tax year with the added bonus that the Government tops up the payment with tax relief to £3,600. As well as providing for the long term future of a loved one many individuals use child SIPPs to minimise their own inheritance tax liability.

Steve Latto, Head of Pensions at Alliance Trust Savings commented: "Many parents and grandparents are continuing to make their children and grandchildren's long term financial security a priority by maximising pension contributions to their child/grandchild's SIPP. With our Child SIPP a regular contribution of £240 can be set-up and invest regularly in over 4,000 investments. Parents and grandparents can split the burden by paying £120 a month each, this would ensure that the SIPP received the maximum gross contribution of £3,600. Alternatively, a single payment of £2,880 can be made at any point during the tax year, assuming no other contributions have been made"

For more information, visit alliancetrustsavings.co.uk.

* Assumes an annual growth rate of 6%. This is the FSA's mid projection rate of 7% minus 1% for charges.