The number of families contributing to pensions for under-18s has increased "significantly" over the past three years, research from Lubbock Fine has revealed, with around 38,000 families in the UK already paying into their children’s pension pots in 2020/21.

The analysis showed that the number of families paying into a pension for under-18s jumped 36 per cent from 25,000 to 34,000 between 2018/19 and 2019/20, and another 12 per cent to 38,000 in 2020/21.

In addition to this, it showed that a total of £67.5m was paid into pensions for under-18s in 2020/21 alone.

The firm highlighted the findings as demonstration that more families are taking advantage of attractive tax reliefs to start building wealth for their children, emphasising that starting early allows them to take full advantage of the power of compounding.

Indeed, analysis from the firm showed that that families who contribute £240 per month into a pension from their child’s birth will give them a pension pot of over £100,000 by the time they are 18, assuming annual growth of 5 per cent and received tax relief.

Lubbock Fine Wealth Management chartered financial planner, Görkem Gökyiğit, stated: “One of the best things a parent can do for their child is to start a pension for them as soon as possible, if they can afford it. They can have a large part of their retirement sorted by the time they turn 18.”

“Compounding is an enormously powerful force in investment. The longer you can make use of it, the better. Getting 18 years of compounding before your child even gets to university will be a huge benefit to them.”

Gökyiğit also pointed out that, in comparison to Junior ISAs, pensions have the added benefit of not being accessible to the beneficiary until retirement, suggesting that for parents who fear that their children might spend a sudden windfall unwisely at such a young age, pensions can provide added reassurance.

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