Too early or too late to start saving?

21 November 2019

Many people would agree that it's never too early, or too late to start putting money away for whatever reason – retirement, an emergency fund, holiday savings…you name it, it's sensible to save for it. The 'rainy day' analogy so far this autumn I am sure has some resonance.

Timing can be a vital factor in how successful your savings planning turns out to be. If you start to save for your retirement early, as an example, you've got more chance of retiring comfortably than if you begin contributing into pensions later in life. So, how early can you actually start saving?

Children & grandchildren's pensions

A pension plan can be started for a child or grandchild from birth – there's no minimum age at which pension contributions can start. However, there is a limit which applies to anyone with no pensionable income, and this is currently £2,880 net per tax year (£3,600 gross with basic rate tax relief added on).

It's important to bear in mind that, under current rules, the minimum age at which pension benefits can be accessed is 55 (unless exceptional circumstances apply). This minimum age is planned to rise to age 57 from 2028 and we would anticipate it rising further in the future. This could well be a positive point, if you are saving for the very long term and keen to avoid the child in question getting hold of the money for purposes other than retirement. You also have to remember that if you're paying in at the start of their lives, then you may not be around for them to thank you! It's a great way of making gifts to fall under the annual gift allowance limit of £3,000 for inheritance tax purposes (with basic rate tax relief being added on to the net contribution).

However, if you're saving for a specific future cost like education or university, house deposit or life event, there are other options which can be alternatives or accompaniments to pension savings.

Savings and investments – the early years

Again, there's no restriction on when you start saving (or when family and friends start saving on your behalf, which is now quite common). Savings can be in cash, if a lower risk approach is preferred, or in investments (stocks & shares) for higher risk funds, or a mixture of both.

It's good to use the tax-efficient Junior ISA (JISA) allowance every year, if possible. Children under the age of 18 are entitled to hold one cash JISA and one stocks & shares JISA arrangement and you can contribute to one or both each tax year. The limit overall in this tax year (2019/2020) is £4,368. Have a look here for more details:

Parents or guardians with parental responsibility can open a JISA and manage the account, but the money belongs to the child. Anyone can pay in, including parents, grandparents, other family and friends. The child can take control of the account when they are 16 but can't withdraw the money till age 18. At that point, it's theirs to access and use as they wish – hopefully for what you planned, noting that this can be a concern for some.

Children can hold savings and investments outside of JISAs and if the interest / investment income the child receives in a tax year is less than the personal allowance for that year, no tax will be due.

An important point to watch is that if a parent gives a child money outside a suitable trust or tax-efficient investment such as a JISA, and this generates interest of over £100 gross in a tax year, the whole amount of this income will be taxed as if it were the parent's own income, at the parent's highest marginal rate. This limit applies to parental gifts only, not to gifts from other family members, such as grandparents.

Savings and investments – the teenage years

When a young person reaches the age of 16, they are allowed the full adult ISA allowance, which is currently £20,000, although this can only be contributed into a cash ISA between the ages of 16 and 18.

At the age of 18, all four types of ISA arrangement are available to them – the cash ISA, as noted above, the stocks & shares ISA, the innovative finance ISA and the Lifetime ISA.

You can put money into one of each kind of ISA each tax year. More details (and of course conditions) here:

Too late to start saving? Help to Buy ISAs

Well, not quite too late, but nearly! Help to Buy ISAs are a type of cash ISA designed to help first-time buyers save up a deposit for their first home. They are available to anyone who is over 16 and a first-time buyer. The government will add 25% to the savings an individual makes, up to a maximum of £3,000 on savings of £12,000.

As you would expect, there are a number of strict conditions that apply to this type of ISA arrangement and it is important to review these before committing any savings to ensure that the Help to Buy ISA is right for you and your circumstances. More details can be found on the Money Advice Service website here: and on the government website here:

Help to Buy ISAs are only available to new savers until 30 November 2019, so if you think this type of arrangement could be helpful for you or for someone you know, make sure you investigate further now to avoid missing the deadline.


There is a lot to consider when planning longer-term investments, either for yourself or for younger family members, and the team at Chapters Financial are here to help.

No individual advice is provided during the course of this blog.

Vicky Fulcher


Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899