editorial
New research from PensionBee suggests that parents could help their children accumulate more than £300,000 in pension wealth by contributing to their child’s pension from the age of 18. With concerns growing around the sustainability of the State Pension and the adequacy of minimum contribution levels under Auto-Enrolment, PensionBee’s analysis highlights the potential role parents could play in securing their children’s long-term financial security by investing in a private pension.
PensionBee modeled two scenarios to demonstrate the impact of passing on wealth through pension contributions. In the first scenario, a 50-year-old parent gifting their 18-year-old child £200 per month for 20 years would contribute a total of £48,000. By the time the child reaches retirement age at 64, their pension could be worth £329,573, almost five times the amount the parent contributed, thanks to estimated investment growth and tax relief on contributions.
The second scenario considers a parent making a £50 pension contribution per month over the same 20-year period. This would result in a total contribution of £12,000, which could amount to £82,393 at retirement. While this is a lower figure compared to scenario 1, it is still equivalent to over seven years of State Pension support, assuming the new full State Pension amount for 2024.
Becky O’Connor, Director of Public Affairs at PensionBee, emphasizes the potential of the “Bank of Mum and Dad” as an untapped resource for boosting retirement prospects. She states that despite traditionally being reserved for first home deposits, parents should consider boosting their adult children’s pensions. Younger workers are uncertain about the availability of the State Pension in the future, and enhancing their pension can provide peace of mind that they will be able to afford retirement amidst this uncertainty.
Follow crowdfundingmagazine on Instagram: @crowdfundingmagazine_it
