When it comes to saving for your children's future, pensions and individual savings accounts (Isas) both offer tax-efficient ways to save. But which is the cheapest - and better - way of getting to the largest sum by the time your child needs to use the cash?
Taking out a pension for your child may seem like delayed gratification, but they could end up sitting on a pot of more than £500,000 by age 55 if you start paying in now - an investment they are likely to thank you for in their later years. Pensions are among the most generous savings vehicles around due to the large chunk of tax relief awarded to any investment, and so a good way to make the most of any income you put aside for them. As children do not earn income, your investment on their behalf into the pension will be capped at £240 per month, an annual limit of £2,880. However, when basic rate tax relief of 20 per cent is added, that sum rises to £300 a month - or £3,600 per year - a £720 top-up.