How would you like to make sure your kids will be millionaires when they retire?

A couple of years ago the UK Government introduced Stakeholder Pensions as a low cost retirement savings scheme for any one in the country. These were aimed at people with no job or no company scheme. The take up wasnt great but the schemes remain.

One advantage of the Stakeholder Pension scheme is that anyone can open one and there is no age restriction. This means you can open one for your children.

The extra advantage is that any money that is put into the pension gets a tax rebate from the government.

This means that if you put 78 in the pension scheme, the pension company can claim back another 22 from the Inland Revenue because its assumed that tax was originally paid on the money invested. Over a year this would mean an extra 12 lots of 22 making a top up of 264 from the Government. You even get this if you are not a tax payer.

In any one year you can contribute up to 3,600 (including the rebate from the Inland Revenue) so unless youre a higher rate tax payer that would be 2,808 a year (or 234 a month) with the Inland Revenue topping up the additional 792.

Now if you started putting this much into your son or daughters pension from birth until their 18th birthday, this is what it could turn into. If we use a growth rate of 8% (which is low compared to the long term historic rates of shares and property) then at 18 the pension fund would be worth 144,684. If that fund was just left to grow at 8% with no more money being put in, it would grow to 2,764,815 at age 55 and a staggering 6,136,895 at age 65.

If you put in 85 a month from birth to 18 then your son or daughter would have over 1 million in their pension fund at age 55 and even if you only put in just over 38 a month for those first 18 years the fund would grow to 1,000,000 by the time they reached 65.

It may not be much but its a start.

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