How to make your baby a millionaire

Alliance Trust Savings, one of the country's leading SIPP providers, has shown that parents could make their baby a millionaire by simply contributing just £83 per month or making an annual contribution of £960 to a child SIPP.

Crucially, the child would need to continue contributing as an adult to their SIPP in order to become a pension millionaire.

For most parents, saving regularly is an integral part of securing their child's financial future. The focus of much of this saving is on short to medium term needs such as purchasing a first car, however, for real long term financial stability, parents could consider a child SIPP as an alternative way of providing long term security.

With an ever ageing population, security in old age is an increasingly important issue. The Department for Work and Pensions (DWP) has previously revealed that more than ten million people of today's population will reach the age of 100. Of the ten million set to become centenarians, over three million are currently under the age of 16.

Making regular contributions to a child or grandchild's pension may not seem like the obvious choice for most parents/grandparents. However, given the flexible nature of SIPPs and the tax relief offered by the Government, they can provide a very simple way of securing a child's financial future in retirement. In addition, for every £80 paid in to a child SIPP the Government will add a further £20 to the fund through tax relief.

Additional payments from grandparents and other family members for birthdays and special occasions can also help boost the funds paid into a child SIPP and will also qualify for tax relief.

By kick starting a child SIPP and contributing £83 per month, parents and grandparents can ensure that at retirement their child will have a pension pot of just over £1m.  The SIPP wrapper provides the child with extensive investment choice sufficient to meet their investment needs throughout their lifetime.

Steve Latto, head of pensions at Alliance Trust Savings commented: "A child SIPP should be a major consideration for parents who are looking for the peace of mind that comes from knowing they are helping create a significant pension pot for their child. 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.

"We have a significant number of parents already using an Alliance Trust Savings Child SIPP for their children in order to take advantage of tax relief and the flexibility that SIPPs offer. With our Child SIPP, parents have access to an extensive range of investment options including over 1,400 funds and can even trade in international equities."