That is the massive effect that compounding can have given the extra investment term.
At age 18 the pot your client has contributed to is only worth £12,678, but leaving that to grow until their child is age 65 means it grows to just over five times that amount.
Most people will want their children to have a smile on their face on Christmas morning which will be hard to achieve by showing them a statement saying where their pension money has been invested.
But, even if it is not a winning Christmas present idea for your clients, the same result could be achieved by them spending £33.33 net per month on pension contribution, the equivalent of £1.10 a day.
If your clients are in the fortunate position to be able to fully fund their children’s pension, placing £3,600 gross into a pension per year until they are 18, that would give them a massive £459,832 in real terms at age 65.
So while we get a bit contemplative at this time of year, and look forward to catching up and having a meal with family, this is some real food for thought and could help to wrap up Christmas for many years to come.
Mark Devlin is a senior technical manager at Prudential UK