Stakeholder pensions for minors - tax benefits to continue

November 2005

It is perfectly acceptable for parents, grandparents or other interested persons to set up and pay for a stakeholder pension for your children.

The rules allow for a gross contribution of up to £3,600 per year. After notional tax has been deducted the net amount payable is £2,808. Payment up to this amount can be made even when the beneficiary has no relevant earnings.

The £3,600 will be invested in a tax exempt fund and the minor will not be able to withdraw any cash benefits until age 50 (Note. The pensionable age is due to rise to age 55 by the year 2010) - so this is a long term and tax effective investment.

The good news is that this favourable tax treatment will not be affected by the new rules on pensions which start on the 1 April 2006.