Women fall behind men when it comes to Pensions and investments.
To help level up between your grandchildren consider creating a pension for your granddaughter. When she hits 55 you will be the best Granny or Grandad ever for giving her long term protection. As she emerges into pensionable age she should be back level with her brothers.
For various reasons girls fall behind boys for long term investments, they are held back by the following:
- Lower full time salaries – the ongoing glass ceiling problems, lead to smaller personal pension contributions for women.
- Part time salaries – women are more likely than men to be in part time work which leads to smaller pension contributions.
- Careers breaks to raise a family – Women are often the care givers for small children and this can create pension contribution gaps.
- Career breaks to be a full time unpaid carer for a relative – Caring for an elderly relative can cut short a womans career at her peak earning point. Leading to lower pension contributions.
- Unthinking Annuities – When a pension matures an annuity is bought which then pays out the pension. If this is the largest pension in the household and is linked to an individual it can result in a significant change in financial circumstances should that individual die and be survived by their partner. Currently most women outlive their partners by 6 years. Couples need to take extra care if there is an age gap between them, if one of them smokes, is in poor health or carrying extra weight. An annuity can be bought to pay out jointly, providing protection for a remaining partner. You should seek good professional financial advice as a couple if you are considering purchasing an annuity.
If you want to make a long term investment on behalf of your granddaughter, consider a Junior Self-Invested Pension. It allows parents/ guardians, grandparents a chance to be involved in the future investment decisions for the child
Who is in control of a Junior Self Invested Pension (JSIP)?
Until the age of 18, a parent or guardian will make the investment decisions in the junior Self Invested Pension account. The adult can choose the investments to buy, with or without he help of the child but neither the parent or the child can make any withdrawals. After the child is 18 they can take over the investment decisions and also contribute further themselves. The child can not withdraw from the account until they reach the age of 55. Which neatly sidesteps those reckless years which we all miss!
The government helps out too!
A pension is more tax-efficient than an ISA, the government will give tax relief on your money, in effect topping up your grand-daughter’s pension further.
- For every £80 contributed a further £20 will be added in tax relief. This is a long-term investment giving children a head start.
- Invest up to £2,880 per child each tax year and HMRC will top this up with a further £720 to give an investment of £3,600.
- As she gets into her 20’s and 30’s there will already be a pension fund they can then build on.