£300k could be added to child’s pension by parents, PensionBee finds

Parents could provide more than £300,000 in pension wealth for their children by the time they reach retirement age by contributing to their child’s pension from the age of 18, new research from PensionBee has found.

With concerns growing around the sustainability of the state pension, and the adequacy of minimum contribution levels under auto-enrolment to provide enough income in retirement for a moderate standard of living, PensionBee has said that the role of parents could help secure long-term financial security for their children through pension investment.

The online pension provider has modelled two different scenarios to illustrate the potential impact of passing on wealth to children through pension contributions.

The first revealed that if a 50-year-old parent gifted their 18-year-old child £200 per month as a pension contribution over a 20-year period, they would contribute £48,000 in total.

With the typical retirement age in the UK standing at 64, the child’s pension could be worth £329,573 by the time they finish work. This is almost five times the amount the parent contributed the pension, as a result of investment growth and tax relief on contributions.

The second scenario explored if a parent contributed £50 per month over the same period, totalling £12,000, the pension could be worth £82,393.

PensionBee has said that whilst this is a much lower figure than in the first scenario, the overall sum equates to over seven years of state pension support, assuming the new full state pension amount for 2024.

Director of public affairs at PensionBee, Becky O’Connor, said: “The bank of mum and dad is an untapped resource when it comes to boosting your retirement prospects; their funds are usually reserved for first home deposits. But there are a few reasons to consider boosting your adult children’s pensions.

“Younger workers feel unsure whether the state pension will even still exist for them when they get older. Boosting their pension is one way to provide greater peace of mind that they will still be able to afford to retire at all one day, in the face of this uncertainty.

“Equally, the minimum amount under auto-enrolment that people contribute to a workplace scheme, though very valuable, is unlikely to reach a pot size big enough for a moderate standard of living.

“The main advantage of additional payments to a pension when someone is young is that the growth has more time to compound. But many young workers may not feel like they are able to make additional contributions themselves if other outgoings and savings commitments are high. This is where paying into a pension for adult children can come into its own, in an act of forward-thinking generosity.”

    Share Story:

Recent Stories

Helping landlords make their cash work harder
MoneyAge Editor, Adam Cadle, talks to Family Building Society BDMs, Arif Kara and Nathan Waller, about the resilient BTL market, the wide variety of landlords that Family Building Society caters for, and how niche products like an Offset mortgage can help improve cashflow.

An outlook on the BTL market
MoneyAge Editor, Adam Cadle, talks to Landbay senior regional account manager, Alex Witham, about current market sentiment within the BTL space and Landbay’s success in this area

Empowering advisers: A decade of education in Later Life Lending with Air Academy
Michael Griffiths is joined by chairman of Air Club and former founder and CEO of Air, Stuart Wilson, and head of the Air Academy, Daniel Holden, to look back on a decade of business focused learning at the Air Academy.


Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.