My husband and I are pensioners in our 70s and would like to use some of our disposable income to contribute, on a regular basis, to pensions for our two grandchildren.
They are aged 21 and 19 and will be in full-time education for the next two years.
Is this a reasonable thing to do and, if so, how do we go about it?
EM, via email
Pensions are a good way to set some money aside for your grandchildren, but bear in mind that they will not be able to access this money until they are in their 50s - meaning that it will not be available to help pay for university or their first home.
Younger people are unlikely to enjoy the gold-plated pension benefits their parents and grandparents had, so creating a pension for them at an early stage is likely to be a great help.
The main benefit of a pension is that the money receives a 20pc uplift in the form of tax relief. Even if they are not earning an income, you can add £3,600 a year, including tax relief.
In practice this means you adding £2,880 a year, or £240 a month, with £720 a year in tax relief automatically claimed by the pension provider.
Lee Clark, chartered financial planner at the investment company Brewin Dolphin, said: "Assuming that you make contributions for 15 years, then your older grandchild could have a pension pot of around £220,000 at the age of 57 even without any further contributions being made.
"If the funds are left until age 67, the pension pot could grow to somewhere in the region of £340,000, assuming a net growth of 5pc a year after charges."
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There is also an inheritance tax benefit to making gifts in this way. Normally gifts are subject to the "seven-year rule", meaning that they are only free of tax if you live for seven years after making them. But if you make the gifts out of income, this may not be the case.
"If you use disposable income, a gift to another person may not be included in your estate if it is part of your 'normal expenditure', is made out of your income and making it does not affect your normal standard of living," Mr Clark added.