Russell’s view – February 2026

Pssst! Want some free money?

Hopefully that has got your attention.

This isn’t my money we’re talking about, but funds from a far better capitalised source: the Government.

That may sound surprising, but despite the well-publicised tax rises from the last two Budgets, the Government does give out money as well as taking it away.

How the Government gives out money

I’m not talking about statutory benefits such as the State Pension or child benefit.

What I’m referring to are the incentives which the Government gives for people to save and invest.

The importance of taking action

All too often, people are either unaware of these incentives or end up missing out because they don’t take action soon enough.

Let’s take Individual Savings Accounts (ISAs) to start with.

As you may be aware, ISAs are accounts where you can enjoy the proceeds free of tax, whether that’s in the form of a cash ISA, stocks & shares ISA or Lifetime ISA (although these are being phased out).

You can save or invest up to £20,000 across all your adult ISAs each tax year and all interest, dividends, or capital gains within an ISA are tax-free.

ISA deadline approaching

The ISA deadline for the current tax year is rapidly approaching – it’s April 5th.

If you can afford to and it forms part of your financial plan, you really should take advantage of the opportunity to maximise tax-free ISAs as much as you can.

While the value of investments in stocks and shares ISAs can fall as well as rise, in the long-term – as I referred to last month – investing money has outperformed returns on cash.

Putting some of your investments in an ISA shelters them from tax and, if you do this regularly, the potential to see your money grow is compelling.

“But this isn’t free money,” you might argue, but tax-free makes a material difference to investment returns.

However, when it comes to pensions, there really is free money for our clients.

How the Government boosts pension savings

If you save in a workplace pension, your contributions are made from pre-tax income, thus saving you anything from 20% to 45% according to the size of your wage packet.

Still not free money?

OK, how about the fact that if you have a private pension – such as one which you’ve created from consolidating pensions from previous workplaces – and you put money into that from your post-tax income, the Government will add 20p to 45p in tax relief for every £1 you put in, depending on your tax rate.

While this is subject to various income and contribution limits, it is without doubt free money.

How the Government boosts children’s investments

What’s more, the Government will also give free money to your children or grandchildren.

Any parent can set up a child’s pension for their child.

It doesn’t have to start with a huge lump sum or have vast amounts put into it.

Regular contributions – even small ones – can really add up over time and make a nest egg for later life.

What’s more, other family members – such as grandparents, aunts and uncles – and family friends can also contribute.

Currently a maximum of £2,880 can be paid into a child’s pension for any one tax year.

And – here’s where the free money comes in – the Government will pay 20% tax relief on those contributions, making it £3,600 a year before a single penny has been earned from investments.

The £1m pension pot

Start early, contribute regularly and your child could potentially have a £1m pension pot by the time they can access it – at age 58 under current legislation.

Investing in a Junior ISA can also give your children a great start to their adult lives.

Junior ISA contributions don’t count towards your personal ISA allowance. Up to £9,000 a year can be put into a Junior ISA in any one tax year and your child gets to keep all interest, dividends, or capital gains tax-free when they turn 18.

Start now on making a difference

There really is no time like the present to make a start on making a difference to your life or the lives of your children.

It worked for me – my daughters have house deposits as a result of Junior ISAs started when they were babes in arms.

They also have started pensions to capture the free money and harness the power of compound investment returns to unlock the financial independence that a £1m pension pot provides.

It’s also easy to do. Get in touch with a Fairstone adviser to find out how you can make the most of what is on offer and how that could fit into your financial life.

• Russell Bignall is Chief Financial Planning Officer at Fairstone

Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. Always seek professional advice before making financial decisions.