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Children's Pension questions and answers

Important note: The answers here are based on our understanding of pensions legislation. Tax depends on your individual circumstances and may change in the future.

Starting a Children's Pension

Can I open a stakeholder pension for each of my children?

Yes. If you want to save for more than one child you can open a stakeholder pension for each of them. In each child's pension you can get tax relief on up to £2,880 each year. Tax is dependent on individual circumstances and may change in the future.

Can I start a pension for my grandchild?

Only if you are also their legal guardian. Otherwise, no. However, you can pay into your grandchild's pension once it is set up. So ask the child's parents or guardian to start a pension for them, then when it is set up you can pay into it.

Are there any risks I need to know about?

Investing in stock market shares is not without its risks. They can rise significantly in value over many years, go into periods of decline, or fall suddenly in value, with no guarantees you will get back the full amount you invest.

The key point to remember is that saving into a pension is a long term investment, and the longer you remain invested in the stock market the better you tend to do.

Please note, under the current rules your child can't access their pension benefits before the age of 55. Also, the amount of pension income provided in their retirement fund will depend on a number of factors, including investment returns, interest and annuity rates when you take your pension benefits.

What happens if I change my mind?

Some savings products give you the right to change your mind and cancel your plan within a certain period. You do not have this right to cancel stock market based investments like the Virgin Stakeholder Pension that are sold over the phone or online.

When your child grows up

What happens when my child eventually reaches retirement?

Where can they find out more about their retirement options?

Sites like the Money Advice Service can be useful when researching the current rules around accessing pension benefits.

To help understand their options, there is free impartial guidance available. Pension guidance can be accessed on the internet, telephone or face to face through the Government's website Pension Wise.  To find out more visit opens in a new window or call 0800 138 3944. And if advice is needed, you can search for a professional financial adviser in your area at opens in a new window.

What options will my child have when they are ready to access their pension savings?

It should be a long time before your child is ready to access their pension savings. So remember that this answer is based on the current pension legislation and may change in the future.

They will have the choice of taking their funds as an income for life, for example by purchasing a lifetime annuity or taking a scheme pension, or they can flexibly access as much of their funds when they want.

Take their pension savings as a lump sum

They can take their whole fund as cash in one go and get up to 25% of this tax-free. Or they can make several withdrawals over time and receive 25% of each withdrawal tax-free.

Any withdrawals over the tax-free amount of 25% they will be taxed at their marginal rate (individual income tax rate, based on total income for that tax year, including money from pensions).

Take a regular income

If they would prefer a regular income, they can:
Take an income directly from their pension savings fund, which remains invested (known as 'income drawdown'). Through income drawdown, they can take up to 25% of their pension savings immediately tax-free and the rest as taxable income at a later date. Take out an annuity (where they swap their pension savings pot for a secure, taxable income, either for a fixed period or for life).

The amount of tax due will depend on how they take their pension funds and on their own personal circumstances.

With Virgin Money, you can only take all your pension savings in one go as an uncrystallised pension lump sum but remember you are always free to transfer your pension savings to another pension provider that offers any or all of the options you want to access.

How do I access the Government’s free and impartial guidance service?

Pension Wise is a government service offering people aged 50 or over free, impartial guidance about their workplace or personal pension choices. You can receive Pension Wise guidance online, over the phone or face to face.

Pension Wise provides tailored guidance to explain what options you have and help you think about how to make best use of your pension savings. It offers information about the tax implications of different options and other important things you should think about, as well as tips on how to get the best deal, including how to shop around.

Pension Wise can help you make the decision that is right for you.

To receive free, impartial guidance from the government, go to or call 0800 138 3944.

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