Paying into a pension for a child or grandchild

A parent, grandparent or anyone else can pay up to £2,880 a year into a personal or stakeholder pension held in a child’s name. The scheme claims basic rate tax relief from HMRC under relief at source and adds it to the pot, so £2,880 paid in becomes £3,600. The child does not need any earnings, but the money is locked in until the child reaches the minimum pension age.

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Where does the £2,880 figure come from?

Section 190 of the Finance Act 2004 sets the most a member can pay into registered pension schemes with tax relief in a tax year. It is the higher of 100% of the member’s relevant UK earnings chargeable to income tax and a “basic amount” of £3,600. A child with no earnings therefore has a limit of £3,600 gross.

Relief for a non earner is only available through relief at source. HMRC’s Pensions Tax Manual at PTM044220 says that where a member’s earnings are below £3,600, relief at source is the only method by which relief can be given on contributions above their earnings. Under relief at source the contribution is paid net of basic rate tax (20%) and the scheme administrator reclaims the tax from HMRC and adds it to the fund. A net payment of £2,880 plus £720 of relief gives the £3,600 gross figure. GOV.UK puts it the same way: a provider can claim relief at 20% on up to £2,880 a year for someone with no earnings.

The limit applies per tax year, 6 April to 5 April. HMRC’s manual at PTM044100 confirms that relief can only be claimed for the tax year in which the contribution is actually paid and that unused relief cannot be carried back or forward. Missing one year does not allow a double payment the next.

Who can open the pension and pay into it?

The child is the member. Relief at source works only if the scheme administrator holds certain information and declarations before the first contribution: full name, permanent address, date of birth and National Insurance number, or a statement that one is not held. Regulation 7 of the Registered Pension Schemes (Relief at Source) Regulations 2005 lets a parent, guardian or person with parental responsibility give these on behalf of a child under 16, and HMRC notes that a child under 16 does not have to provide the statement about not having a National Insurance number. GOV.UK lists “aged under 16” as one of the employment status options a member can give the provider.

Once the pension exists, anyone can contribute. PTM044220 says a third party other than an employer may pay a contribution for the member net of basic rate tax, and that the contribution is attributed to the member. In practice the provider adds the 20% top up whether the money came from a parent, a grandparent or a family friend. Most personal and stakeholder pensions use relief at source; GOV.UK says relief at source applies in all personal and stakeholder pensions.

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Is the limit shared between everyone who pays in?

Yes. Because every third party payment is treated as the child’s own contribution, the £3,600 gross limit is the child’s limit, not each relative’s. If two grandparents each pay £2,880 in the same tax year, only the first £2,880 net has room for relief. GOV.UK warns that it is up to the member to make sure they are not getting relief on contributions above the limit, and HMRC can ask for anything over it to be paid back. Families with several generations contributing should agree who pays what.

The relative making the payment gets no income tax relief of their own. PTM044220 says only the member can claim higher rate relief on a third party contribution, and a child with no taxable income has none to claim. A higher rate taxpaying grandparent gets exactly the same £720 top up as anyone else.

What if the child has earnings of their own?

A teenager with a part time job has relevant UK earnings, so their limit is the higher of £3,600 and those earnings. For someone who does not pay income tax, GOV.UK says the provider can claim relief at 20% on contributions up to 80% of their earnings in the year, which is the net equivalent of 100% of gross earnings. A 17 year old with £6,000 of taxable earnings could have up to £4,800 paid in net, grossed up to £6,000. Relief is still added at the basic rate even though the child pays no tax. The child’s own tax position is covered on children with jobs and income tax.

For a child who is a Scottish taxpayer, PTM044220 confirms that where the member pays no tax and contributes within the basic amount, the scheme still claims relief at the Scottish basic rate of 20%.

When can the child get the money?

Not for decades. A registered pension scheme cannot normally pay benefits before normal minimum pension age. PTM062100 says that age has been 55 since 6 April 2010 and rises to 57 from 6 April 2028, and scheme rules can set a later age. The age has been changed by legislation before and could change again before a child born today retires, which is covered on normal minimum pension age.

When benefits are eventually taken, GOV.UK says up to 25% of a pension can usually be taken tax free, subject to the lump sum allowance, currently £268,275, with the rest taxed as income. Growth inside the pension is not taxed in the meantime.

Contributions also count towards the child’s annual allowance, which GOV.UK confirms covers amounts paid in “by you or anyone else”. At £60,000 for 2026 to 2027, £3,600 a year is nowhere near it. Relief also stops at 75: GOV.UK says relief is available to UK residents aged under 75.

Is the payment a gift for inheritance tax?

Yes, a payment into someone else’s pension is a gift from the person paying. Several GOV.UK exemptions can keep it outside their estate. The annual exemption covers £3,000 of gifts each tax year, with one year’s unused exemption carried forward, so a single £2,880 payment fits inside it. Regular payments out of income are also exempt with no upper limit if the giver can afford them after meeting usual living costs and pays them from regular income; GOV.UK’s examples include paying into a savings account for a child under 18. A monthly contribution from a grandparent’s pension or salary is a natural fit, but records showing income and spending help if the executors later claim the exemption. See the annual exemption and small gifts and normal expenditure out of income.

What does this look like in practice?

Illustration only. A grandmother sets up a direct debit of £240 a month into a stakeholder pension her son opened for his daughter, aged six. Over the tax year she pays £2,880. The provider makes interim claims to HMRC and adds £60 for each payment, £720 in total, so the pension receives £3,600. Her son also pays a one off £500 in March. That takes the net total to £3,380, which is above the £2,880 that can attract relief for a child with no earnings, so the £500 should not have relief added; if it is, HMRC can recover it. The son would do better to wait until 6 April and pay in the new tax year, or to put the £500 into a Junior ISA.

How does it compare with a Junior ISA?

The two do different jobs. A Junior ISA takes up to £9,000 for 2026 to 2027 with no tax relief going in, but the child can take control at 16 and withdraw at 18. A pension gives an immediate 25% uplift on the net payment but cannot be touched until the child is at least 57 under current law. Many families use a Junior ISA for university or a first home and a pension for the long term. The tax treatment of a child’s savings is on Junior ISAs and child savings tax.

What mistakes come up most often?

Thinking the £2,880 limit is per relative. It is per child, across every payer and every relief at source scheme the child has.
Choosing a scheme that does not use relief at source. Without relief at source a non earning child gets no relief at all.
Paying in late March and missing the cut off. Relief belongs to the tax year in which the payment is made.
Expecting the grandparent to get relief. The relief goes to the child’s pension; the payer gets none.
Forgetting the lock in. The money cannot be released early for school fees or a deposit without unauthorised payment charges.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.