Can I pay more than £2,800 into my child's pension in a year?

11 January 2023

Question by Richard

Can I pay more than £2,800 into my child's pension in a year? I appreciate nothing above that level attracts tax relief, but I'd rather make a lump sum contribution and be done. 'Child' in question is 19.

Answered by Chris Broome

Dear Richard,

That's a great question to ask.

The maximum net tax-relievable contribution that an individual can make in a tax year is £2,880, which is grossed up to £3,600 in a personal pension. If third party contributions are permitted by the pension scheme, it’s almost certainly the case that the terms of the scheme will disallow contributions that don’t attract tax relief.

This is because most schemes operate automated processes for reclaiming the relief from HMRC. You can either call them and ask or check the T&C document. Furthermore, unless it already exists, your child would need to open the pension – you cannot contract on their behalf now they are an adult.

Assuming the child doesn’t have income to support a higher level of tax-relievable contribution, you will need to limit your saving to £2,880 unless the scheme allows contributions that don’t qualify for tax-relief.

Another option would be to put the surplus money into a separate savings account in your name and make future payments from there. You could use a 1-year fix rate account, with the maturity prompting you that another £2,880 (or higher, depending on income situation) can be made.

You don’t say how much you’d like to save, but missing the opportunity for tax relief that will increase each £1 invested to £1.25 would be a costly long-term sacrifice.

Another option, could be for your child to open a Stocks and Shares ISA, into which £20,000 per annum could be saved. There's no tax relief on this contributions, however the money will grow tax-free and can be accessed tax free. Of course, this requires trust, as the ISA funds are accessible by the child for whatever purpose they choose.

With hope that helps. If you need to know anything else just let me know.

Kind regards

Chris Broome

Answered by

Chris Broome

Chartered Financial Planner

My name is Chris Broome and I own a wonderful fixed-fee and independent financial planning practice called Longhurst.