Child trust fund

[ChimpMaster]

Interestingly, if you invest just £2808 (net of tax) into a stakeholder pension for your child in the first year of their life they will have a pot worth £185k ish in todays money when they reach 65.

In 65 years time 185k will not have much buying power. Imagine taking 10k back to 1940 - it would be worth a heck of a lot back then... but now it's diddly tulipe.

[moorfield]

In 65 years time 185k will not have much buying power. Imagine taking 10k back to 1940 - it would be worth a heck of a lot back then... but now it's diddly tulipe.

No - that is £185k in TODAYS money - check out the pension calculators.

The real amount on a £3600 investment in 65 years time will be something like £900k.

[TheFaQQer]

Agreed - I guess how much you lump into a CTF depends how much you're prepared to risk "losing" through your childs spending.

If you invest £1200/year for 18 years then your child will have a pot worth £30k ish in todays money.

Interestingly, if you invest just £2808 (net of tax) into a stakeholder pension for your child in the first year of their life they will have a pot worth £185k ish in todays money when they reach 65.

In 65 years time 185k will not have much buying power. Imagine taking 10k back to 1940 - it would be worth a heck of a lot back then... but now it's diddly tulipe.

That's why the key words in moorfield's post are in today's money.

[ChimpMaster]

No - that is £185k in TODAYS money - check out the pension calculators.

The real amount on a £3600 investment in 65 years time will be something like £900k.

Sounds interesting - how does it work, i.e. what are the assumptions based on.

The reason I thought otherwise is that I took 3k and just applied compound interested to it over 65 years, hence why I thought it wasn't that much.

[Lewis]

No - that is £185k in TODAYS money - check out the pension calculators.

The real amount on a £3600 investment in 65 years time will be something like £900k.

Well unfortunately these figures aren't right. After reading this post I have started the process of a pension for our 1 year old. We are going to pay £234 per month which after tax relief becomes £3600 per year which is the most you can pay. We are only planning on doing it for 1 year.

£3600 at 6% compound interest (medium return is 7% minus 1% comission) over 65 years is £158,921. That is more like £40K in today's money (dividing by 4 which is roughly what they have done on the pension forecast) which is a pension of around £1K per year in today's money at retirement (again based on the pension forecast figures).

A far cry from the figures mentioned above. If you continue to pay £3600 every year until retirement then the figures are more like the post above!

That said, it is a good idea and we are going to go ahead anyway. I would be happily corrected if you think these calculations are wrong.