Hargreaves Lansdown is encouraging investors to set up a Junior Sipp for their children.
Family can invest up to £3,600 a year gross in a Sipp for a child. Some £2,880 would be invested with the balance being reclaimed from HM Revenue and Customs.
If £300 per month was invested for the first 18 years of a child's life this would cost £52,000. Assuming seven per cent growth and 1.5 per cent in charges, this would total £1.8m by the time the child is 65, without them making any further contributions.
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Benefits of this method include the gifts are likely to be free from inheritance tax if paid from regular income and the fund is outside the estate for inheritance tax purposes.
There is no minimum age that a Junior Sipp can be started and the child won't be able to access the cash until they are 55. This means a more adventurous investment strategy can be taken over a longer time-period.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: "Parents or grandparents who are fortunate enough to have disposable income to save for the next generation can give their children a head start by investing in a Sipp. It is not only a good investment, it is also an extremely tax-efficient way to pass money on."

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