Pension contributions for under-18s rose to £79.6m in 2022/23, up from £75.9m the year before, according to Lubbock Fine Wealth Management (LFWM).
The firm said more families are using children’s pensions as a tool for inheritance tax (IHT) planning.
There are now 45,000 under-18s with pensions, up from 42,000 in 2021/22, as parents and grandparents move wealth into pension pots to reduce future IHT bills.
Gifts made this way can become exempt from IHT after seven years.
LFWM added that pension pots also grow tax-free and are less likely to be accessed for general spending.
The trend could accelerate after April 2027, when recent Budget changes bring parents’ and grandparents’ pensions into the IHT net.
Andrew Tricker, director at LFWM, said: “Pension contributions for minors are growing because parents increasingly see those pensions as an IHT tool. More obviously, it’s a good way of jump-starting your child’s pension fund.”
Parents can contribute up to £2,880 a year, rising to £3,600 with tax relief.
LFWM said pensions remain one of the few “legitimate tax shelters” for family wealth, offering long-term, tax-free growth and intergenerational planning benefits.
