How Grandparents Can Turn £240 a Month Into Over £700,000 — The Power of a Junior Pension.
Jan 13, 2026
Discover how grandparents in the UK can invest just £240 a month into a junior pension for their grandchild and potentially grow it into over £700,000 through the power of compounding. Learn how tax relief, time and consistent saving can create a lasting financial legacy.
The Gift That Keeps Growing
When baby Sophie was born, her grandparents, Anne and Peter, wanted to give her a gift that would last a lifetime — something more meaningful than toys or clothes.
Instead of spending £240 a month on presents, they decided to invest that money into a junior pension — setting her up with a nest egg that could one day transform her financial future.
And thanks to compound growth and government tax relief, that simple act of generosity could turn into a pot worth more than £700,000 by the time Sophie retires.
What Is a Junior Pension?
A junior pension (also known as a child’s personal pension) is a long-term investment account that can be opened by a parent or guardian for a child under 18.
Here’s what makes it so powerful — especially for grandparents:
- Anyone can contribute, including grandparents.
- Up to £2,880 can be paid in each tax year — and the government adds 20% tax relief, boosting it to £3,600.
- <The money is invested for the long term and can’t be accessed until at least age 55 (rising to 57).
That might sound a long way off, but it’s the very reason this works — because time is the most powerful ingredient in investing.<
The Power of Compounding Growth
Let’s use a simple example. https://www.moneysavingexpert.com/savings/savings-calculator/
Anne and Peter invest £240 a month (£2,880 a year) into Sophie’s junior pension, with 20% tax relief, that becomes £3,600 a year invested.
Assuming an average return of 5% a year, here’s what could happen over time.
Scenario 1: Contribute until age 18
- Total paid in: £64,800 (£3,600 × 18 years)
- Growth: 5% a
- Total period: 57 years (18 years of contributions + 39 years of compounding)
- Estimated value at age 57: ~£710,000
Scenario 2: Contribute continuously until age 57
- Total paid in: £205,200
- Growth: 5% a year
- Estimated value at age 57: ~£900,000
Even when contributions stop after 18 years, the pot continues to grow for decades thanks to the snowball effect of compounding — where returns generate more returns over time.
Why Grandparents Are Choosing Junior Pensions
For many grandparents, a junior pension is more than just an investment — it’s a financial legacy. It’s a way to:
- Give grandchildren a head start in later life.
- Teach financial responsibility by showing the value of long-term
- Make use of tax-efficient investing, even for a child who doesn’t earn.
- Grow wealth quietly in the background, free from the short-term temptations of other savings options.
And while £240 a month is a generous example, even £25 or £50 monthly contributions can grow into a meaningful sum over time.
Time Is the Real Secret
Think of a junior pension like planting an oak tree. You nurture it early, then give it time to grow.
The earlier the contributions start, the longer the investment has to benefit from compounding growth — turning small, consistent savings into something substantial over the decades.
That’s why starting early is often more important than how much you contribute.
A Legacy Beyond Money
Years from now, when Sophie reaches retirement age, she may never remember the toys or gadgets from her childhood — but she will remember that her grandparents gave her something truly priceless: financial security and freedom.
A junior pension is one of the most thoughtful, long-term gifts a grandparent can give. It’s not about the amount you invest — it’s about giving your loved one the gift of time, growth and future stability.
Important Information
The value of pensions and investments can go down as well as up. You may get back less than you invested. Tax treatment depends on individual circumstances and may change in the future. Pension rules can also change, including the minimum access age.
If you’re considering setting up a junior pension, you may wish to seek advice from a professional financial adviser to ensure it’s the right option for your family.
Approver Quilter Financial Services Ltd November 2025.
