With the European population growing steadily older, people have never lived so long – and they are taking out pensions at a younger age than ever before.

Thinking about retirement provisions was once left until the twilight years of working life when a worker would make vague enquiries as to how much money he or she would be entitled to, and has always been a matter for the individual, not their parents.

But with the retirement age stealthily creeping up – now standing at 68 – and government pensions provisions set to dwindle in the face of private funds and personal investments, young people and even parents of young children are being encouraged to look into how best to stash away funds to avoid too many rainy days later on in life.

Forget the government's persistent plugging of child trust funds: Virgin Money has revealed that one in ten people who took out pensions in the past year did so for children, with half of them for youngsters under the age of five.

But these seemingly over-zealous parents have their finger on the pensions pulse, Virgin Money confirms, as gifts to newborn babies total an average value of £660.

When combined with monthly child benefit or the equivalent sum (£75) until the child is 20, their retirement nest egg when aged 65 will be a fat £618,000 – even if they have never made a single pension payment themselves.

At current annuity rates, a man could comfortably expect to receive a yearly income of £39,000, boosted by tax free interest, the figures reveal – as adding £2,808 to a pension scheme each year translates into £3,600, a 30 per cent increase in the contribution, regardless of how old the recipient may be.

When compared to child trust funds, the numbers also start to add up in favour of kids' pensions, with the £792 government contribution a 63 per cent higher amount of 'free cash' than given to a child's trust fund over their lifetime, in most cases.

However, if choosing one over the other in the child pension/child trust fund debate, parents need to bear in mind exactly when children are most likely to need the money, as child trust funds can be accessed at age 18, but pensions not until a person has passed his or her 50th birthday.

Jason Wyer-Smith of Virgin Money said: "The thought of saving for a pension can fill a young person with dread so it's great to be able to get your kids off to a flying start when they're still in nappies."

An 'alternative' christening present which is rapidly overtaking less practical gift such as silver spoons in popularity, child pensions now account for one per cent of all policies, as parents concentrating on their own pensions problems looking to their children's own age look into providing for them.


Children whose parents want to set up pension funds for them are issued with a temporary national insurance number from the government to enable them to build up contributions in the same way as an adult worker.

Although different pension schemes carry various pros and cons in terms of reward on investment, starting contributions from such a young age means even stock market-based products are less risky for children than they could be for older customers, as there is more time for any losses from market fluctuations to balance out with age.

Child pension schemes have no minimum age requirement and contributions can be as little as £1 a month, financial experts confirm.