In a bid to pass more wealth to their loved ones, a growing number of families are opening pensions for their children. Whether your child is still in nursery or already working their way up the career ladder, there could be benefits to making pension contributions on their behalf.
According to an article in the Telegraph (13 June 2026), pension providers have noticed an uptick in the number of pensions opened for a child, with one provider registering a jump of 158%.
This trend is partly being driven by changes to Inheritance Tax (IHT) rules. From 6 April 2027, many pensions will be included in the value of your estate when calculating if IHT is due when you pass away. As a result, some people are opting to contribute to a child’s pension rather than their own.
Whether this strategy is appropriate for you will depend on your personal circumstances and goals, and it’s important to carefully assess the potential implications first.
2 important things to be aware of before contributing to your child’s pension
You can open a pension for your child from the day they are born. In many cases, you can also contribute to a pension that your adult children have. However, you should note:
- A pension cannot usually be accessed until the pension holder reaches pension age
Before you contribute money to a pension, be sure that it’s the right option for you and your child. Money held in a pension cannot usually be accessed until the pension holder reaches 55 (rising to 57 in 2028 and potentially rising further in the future).
As a result, you would not be able to withdraw the money if you changed your mind. Similarly, your child would not be able to access the money if they wanted to use it for another purpose, such as buying a home, before reaching pension age.
2. The Annual Allowance might limit how much you can tax-efficiently contribute to a pension
The Annual Allowance is the maximum amount of money that can be paid into a pension each tax year before the pension holder could be subject to charges.
In 2026/27, the Annual Allowance is £60,000 or 100% of the pension holder’s annual earnings (whichever is lower). Non-taxpayers, including children, have an Annual Allowance of £3,600. In addition, the Annual Allowance may be lower for higher earners or those who have accessed their pension.
The Annual Allowance covers all contributions, including those made by the pension holder, employers, and third parties. So, it’s important to track what you’re contributing and speak to your child about other contributions that are made to avoid unwittingly exceeding the Annual Allowance.
4 reasons you might regularly contribute to your child’s pension
- You could support their future
Contributing to your child’s pension allows you to support their future.
According to the government (19 May 2026), many working-age adults are not saving enough for retirement. It’s estimated that 15 million people are undersaving. Additional regular contributions could make their retirement more financially secure and potentially ease pressure on your child’s finances now.
2. Your additional contribution could grow
Pensions are usually invested with the aim of delivering long-term growth. While investment returns cannot be guaranteed, the initial contribution you make has the potential to grow over the long term.
3. Your contributions will usually benefit from tax relief
Assuming your contributions don’t exceed the Annual Allowance, they will typically benefit from tax relief at your child’s nominal rate of Income Tax. This provides an additional immediate boost to your child’s pension and, as the money will be invested, further potential for long-term growth.
4. Your contributions could be efficient for Inheritance Tax purposes
Gifts you make aren’t always outside of your estate for IHT purposes. Some may be included for up to seven years after they are given. However, some allowances could provide a tax-efficient way to pass on wealth.
One of these allowances is regular payments made to another person. The gifts must be made regularly and come out of your regular income without affecting your standard of living. As a result, making monthly contributions to your child’s pension could allow you to make use of this allowance.
It’s a good idea to keep clear records of your gifts as HMRC may look for a regular pattern of gifting if your estate uses this allowance.
Get in touch
Tax and pension rules can be complex, particularly if you want to support a loved one or consider IHT. We could help you create a financial plan that suits you and your family’s needs. Please contact us to arrange a meeting.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate estate planning, tax planning, or Inheritance Tax planning.