Pensions top financial gift list for children

This Christmas many children could receive a pension from their parents after independent financial advisers voted for these products as the best financial gift for youngsters, acccording to a poll undertaken by 1st - The Exchange.

The second best product to be chosen by these advisers is premium bonds, chosen by 27 per cent of advisers. A further 19 per cent said a Child Trust Fund would be the best gift.

At a time when young adults across the UK are turning away from pensions – with many opting instead for individual savings accounts (Isas) and property – it has been difficult for individuals to recognise the merits of early retirement planning.

Research by Hargreaves Lansdown shows that the earlier a child invests, the bigger the pension pot. Parents who start a self-invested pension plan (Sipp) the year in which their child is born can accumulate a much greater pot than if the child started at age 18.

“There is no other investment that is as tax-efficient,” said Ben Yearsley at Hargreaves Lansdown. “Plus, they can’t get it until they’re 55 so the money won’t be wasted at 18.”

However, pension funds have lost much of their value in the wake the subprime mortgage crisis, causing concern particularly amongst those individuals close to retirement who are no longer able to rely on their investments.

In spite of this experts still believe it is important for parents to invest on behalf of their child. Further research from Hargreaves Lansdown reveals that the life expectancy for both men and women is expected to rise, as are the costs of living.

Paul Yates, director of propositions and business development at 1st - The Exchange, said: ”Many people start thinking about their pensions too late and start to panic in later years when it becomes more difficult to raise the level of income needed to fund retirement.

“With further delays to personal accounts likely, people would be wise to start thinking about their pension now and not wait for auto enrolment to kick in.“

Mr Yates said setting up a pension at an early age is a first step in educating children about the importance of financial planning.