Building a financial foundation for the next generation

Financial certainties are no longer quite as certain as they used to be.

The job for life that our grandparents expected vanished a generation ago. Buying a home has become a struggle for ourselves, while investments continue to be volatile. Inflation is making a nonsense of savings, with purchasing power being eroded. 

With the changes and challenges faced by the working population and the younger generation the question is how can you build and provide a sound financial foundation for your family?

At Continuum we believe there are answers – with the right planning now.

A bleak outlook?

But the outlook does not have to be bleak. If you can help the next generation over the initial challenges of buying a first property and starting a pension and building an investment portfolio, they might still be able to look forward to security and prosperity.

The good news is that with careful investment, even relatively modest sums can make a difference to their future. However, there are no guarantees on investment returns.

The first step is to get your own finances on a secure basis. Recognise your own obligations and take a good look at your resources. You need to have enough in your own pension and have some investments to call on if you need them. None of us know what the future holds and having funds to deal with things like inflation and care cost could be essential for your own peace of mind.

When you know the resources you have to call on, you can start planning on how best to use them.

Setting up a pension

When is the best time to start a pension? The answer is at birth. The sooner we start putting money away, the longer it has to potentially grow, so starting a pension for a child can often mean an extra 25 years of compounded growth to build a sizable pension pot

Taking out a pension for a child is becoming increasingly popular with generous parents and grandparents. 

Tax relief makes it very worthwhile, even though children don’t generally pay tax. A pension arranged for a child can receive up to £2,880 year and deliver 20% tax relief, automatically claimed by the pension provider to add an extra £720 a year. So, the government boosts junior’s pension pot to £3,600.

The £2,880 a year contribution is below the annual £3,000 gift allowance for inheritance tax. This means it falls outside the value of the donor’s estate for inheritance tax purposes. 

When your child reaches 18, they take ownership of the fund. They can sit back and hopefully watch it grow, or continue to make contributions, with their pension pot already off to a very good start.

Under current rules, money in a pension is tied up until the age of 55 – soon to increase to 58. So, savings are kept out of reach, safe from temptation, helping ensure that they can carry on growing. 

A basic, low cost stakeholder pension with capped fees could provide a cost effective child’s pension.


Your children will probably need access to finance well before they start drawing a pension. They will want help to get on the property ladder, and perhaps as they climb it as well. 

An ISA could provide a simple way to invest, with all the proceeds going to them rather than the taxman.

A Junior ISA lets you invest on their behalf. Parents or guardians with parental responsibility can open a Junior ISA and manage the account, but the money belongs to the child.

The child can take control of the account when they’re 16 but cannot withdraw the money until they turn 18. Anyone can contribute up to a total of £9000 in any one tax year.

If a house deposit is still some way off, one way to help them could be a Lifetime ISA, as the government tops up anything put in up to £1,000 a year with an extra 25%. It can help buy that home, or be used towards a pension. 

You can put in up to £4,000 a year into a LISA. Both cash or stocks and shares LISAs exist. For anything less than five years, the general rule is to stick to a cash LISA, which can offer more predictable returns although stock market investment might offer the best prospects for the longer term.


The one worry about investing for a child is that you might not be around to manage the investment for them. One solution can be to invest in a passive fund that invests in stocks around the world to set up a trust fund. This is much easier than you might think, and can have some substantial tax advantages for you and your estate as well as your rising generation.

Getting some help

Pensions, investments and trusts are only some of the investment possibilities to consider. Whatever the age of the children you are investing for, we can work with you to find the most appropriate investments and avoid the tax pitfalls. 

To get your children off to a better financial foundation, simply call us today on 0345 643 0770.

The Financial Conduct Authority does not regulate taxation and trust advice, taxation rates may be subject to future change. 

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.

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