Planning ahead and starting early can really help when it comes to building up wealth for children.
Current pension rules, which could change in the future, allow a parent to put up to £2,880 a year into a pension for a child. Tax relief means that this is then topped up to £3,600. If a parent starts this once a child is born, the contributions would cost about £52,000 over 18 years, and this, under current rules would be topped up by around £13,000 in tax relief.
Assuming growth in investments over the period, when the child reaches age 55 currently, they could have a sizable pension pot, the spending power of which will of course depend on the passage of inflation over the intervening years.
Maximising the Junior ISA allowance could also produce a valuable nest egg. You can save up to £4,368 on behalf of a child in the 2019–20 tax year.
If you’re unable to afford the full subscription each tax year, small regular sums build up over time, so don’t be dissuaded.