With the pensions crisis looming large over Britain, people are beginning to realise that they need to start saving for retirement earlier than ever.

And according to investment platform operator Skandia, it is never too early to start. Make your grandchild a millionaire: Children born today are unlikely to enjoy the same level of retirement income funding that the current level of baby boomers are enjoying.

They will need to be more self-reliant as state support is likely to fall, and company perks such as final salary pension schemes disappear.

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Unlike other investments options such as a junior ISA, a pension can provide basic level tax relief even for a child who is not working, making it an extremely attractive long term savings option. Based on investment growth of 6.

No further contributions would be needed by the child to reach this total but they could choose to invest more themselves once they start work, which would create an even bigger pension fund. The money will be locked away until the grandchild reaches at least age 55, but to reach the total estimated here, they would need to not touch their pension pot for a further five years. Those grandparents in income drawdown could see an additional benefit from this move.

It is not just investing for grandchildren that will help them and their parents fund their future. The research from over 50s insurance provider RIAS found that over 5. Data from Skandia has shown that 59 per cent of those in drawdown do not take an income, but money sat in drawdown is subject to a 55 per cent death tax if paid as a lump sum to beneficiaries. Taking money from that surplus and investing it for grandchildren will mean there is less money subject to the 55 per cent death tax charge.

The income tax paid by the grandparents on their pension income can in part or whole be offset by the income tax relief boost the child receives on the contribution made.

By opening a pension for their grandchild, they can significantly improve the amount their grandchild eventually inherits.

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This is a considerable sum of money to find every month if you are no longer earning, but purely living off your retirement savings.

It will work out well for those in certain specific situations, but could be an impossibility for others. Plus, as every grandparent knows, what you do for one you have to do for the others, so it could end up being a very expensive venture. There's also the effect of inflation to consider. Work out how inflation with affect your retirement savings by using our calculator.

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