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Any IFAs out there?

Any IFAs out there?

By my reading of FA 2004, in order for a registered pension scheme to accept a contribution from an individual, the individual must:

  • be UK resident, and
  • be under 75, and
  • have "relevant earnings" (of any amount > £0) chargeable to income tax (which might then be covered by the personal allowance).

So if a child is, say, entitled to a £1 share of the profits from a furnished holiday let, then a contribution of £3,600 can be made "by or on behalf of" that child.  The pension fund can accumulate and grow tax-free until the child retires or dies.

Is that right?

Let's call the child Sam and assume he's currently 3.

Sam's parents have money to burn and want to make the best possible provision for Sam.  He has a Child Trust Fund or Child ISA to which they make the maximum annual contribution (of £3,600?).

Does a £3,600 pension contribution make any sense?

If it does, what would happen to the pension fund if Sam died in his minority? and what would happens to it if he died in his majority but without dependents?


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04th Apr 2012 12:53


I think there was a feature on this in Tax Adviser some time ago (or a part of a feature). It is possible.

From memory the income of the child and "relevant earnings" is irrelevant. Individuals can each (I think) deposit up to £3.6k per annum into A N Other's pension scheme. You can find this info on HMRCs site.

Dependent upon the circumstances, I think it does make sense and is a reasonable recommendation; not because of tax reasons (it would be difficult to find deductibility against any income I think). It will give the Parents comfort not only over their Child's working life and early years but eventual retirement.

If any IFAs do read this then please do provide me your details by PM, this type of approach/thinking is what I would like to recommend to clients.

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04th Apr 2012 12:56




Tax relief if you put money into someone else's pension scheme

You can put money into someone else's personal pension - like your husband, wife, civil partner, child or grandchild's. They'll get tax relief added to it at the basic rate, but this won't affect your own tax bill. If they've got no income, you can pay in up to £2,880 a year - which becomes £3,600 with tax relief.

If the pension scheme rules allow it you may also be able to put money into someone else's occupational or public service scheme. You'll not get tax relief on your contribution but the other person can get relief either through their tax return or by making a claim to HMRC by telephone or letter."

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04th Apr 2012 18:07


Yes. I can see pros too. I'd be interested to get a better understanding of the cons though.

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