Updated: January 16, 2023
Junior SIPPs
Thinking about setting up a junior SIPP for your child? Our in-depth guide explains all you need to know
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Author: Tony Stevens - Finance Expert
Updated: May 30, 2019
If you’re looking for a way to save for your child’s future, a junior SIPP is one option available to you. A junior SIPP – or Self Invested Personal Pension – is similar to an adult SIPP, but as the name suggests, it’s a way of saving for a child’s retirement.
In this guide, we look at junior SIPPs in detail and explain how they work, how to pick one, and why it’s always worth consulting an advisor before going ahead.
You’ll find the following topics covered in this article…
What is a junior SIPP?
A junior SIPP is a type of personal pension that’s managed by a parent or legal guardian until a child turns 18. Much like their adult equivalents, junior SIPPs give investors full control and flexibility over how and where funds are invested. They are also a tax efficient way of saving for retirement.
Once a child turns 18, they automatically get control over the pension and how and where their money is invested. However, they can’t access their pot until they reach retirement age, which is currently 55 (57 from 2028).
Who can contribute?
Typically, only a parent or guardian can open a junior SIPP for a child. However, anyone can make contributions – grandparents, aunts, uncles, godparents – with the contributions eligible for tax relief as long as the annual contribution limit isn’t exceeded.
What are the rules around them?
There’s a strict limit to the amount you can pay into a junior SIPP every financial year while obtaining tax relief. At the time of writing (November 2022), the annual contribution limit is £3,600. In practice, this means that you can contribute £2,880 (net).
The government then adds another 20% in the form of tax relief, up to a maximum of £720 a year, bringing the total contribution amount up to £3,600 (gross).
While you are technically able to contribute more than this, the contributions will not benefit from tax relief and there will be an annual allowance tax charge to pay. You can choose to contribute a lump sum or make regular payments and all investments inside the junior SIPP grow free of capital gains tax and income tax.
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What are the downsides?
All investments can go up and down and investments in a junior SIPP are no exception. However, as you’ll be investing over a long period of time, likely many decades, there should be plenty of time to ride out any major market dips.
How to pick a junior SIPP
When it comes to selecting the best junior SIPP provider for your needs, there are three main factors to take into consideration: investment choice, fees and minimum investment.
Flexibility is one of the big advantages of junior SIPPs. They offer a wide range of investment options, which include, but are not limited to:
- unit trusts
- investment trusts
- commercial property
- company shares
- gold bullion
- hedge funds
If you have a specific type of investment in mind, make sure well in advance that your provider offers access to it.
There are a number of fees and charges you should be aware of when comparing junior SIPP providers. It’s worth remembering that the cheapest provider won’t always be the best option for you.
The most common charges include:
- Platform/product fees
- Fund charges
- Initial investment fees
- Trading fees
- Transfer fees
All providers have different rules around minimum deposit amounts. Some, for example, will let you invest just £25 a month, while others require at least £50 a month. So it’s important you make sure your provider can accommodate your needs.
Need help choosing a junior SIPP provider? We can help. Get in touch and be matched with one of our independent pensions advisors today.
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Which providers offer them?
There are several junior SIPP providers. They include: Hargreaves Lansdown, Fidelity International, AJ Bell, Charles Stanley and Bestinvest.
It’s always best to shop around before deciding which provider to go for. An experienced pensions advisor can assess your circumstances and advise you on the best product to suit your specific circumstances.
Junior SIPPs vs. junior ISAs
A junior stocks and shares ISA is an alternative long-term savings solution to a junior SIPP. As with a junior SIPP, a junior ISA is typically set up for a child under the age of 18 by a parent or guardian.
The table below compares the two products:
Junior SIPPs | Junior ISAs | |
Access | The child gets control of the SIPP at the age of 18 but can’t withdraw any money from it until 57 under legislation due to be put in place in April 2028. | The child is able to take control of the ISA when they turn 16 and can withdraw money from it when they turn 18. |
Allowance | £3,600 (gross) per tax year, at the time of writing (November 2022). | £9,000 per tax year, at the time of writing (November 2022). |
Tax benefits | 20% tax relief from the government on contributions up until the annual allowance. All investments inside the junior SIPP grow free of capital gains tax and income tax | No tax relief. However, no tax is payable on interest or investment gains. |
Investment choices | You can pick from a wide range of investment options including more esoteric options such as commercial property, hedge funds and gold. | You will typically be limited to funds and company shares. |
Get matched with an independent pensions expert
If you want to open a SIPP for your child, an independent pensions advisor is best placed to help you choose the best provider for your needs. Comparing SIPP providers isn’t easy so it’s worth seeking advice from an expert who knows the market well.
We have advisors in our network with years’ of experience helping people open junior SIPPs.
Give us a call on 0808 189 0463 or or make an enquiry for a free initial chat.
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FAQs
Yes, you can move a junior SIPP from one provider to another. However, before you do, you should find out about any exit fees you may need to pay.
You can have as many as you like but all of them will be limited by the annual allowance of £3,600 (gross) a year across all your accounts.
Ask a quick question
We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.
Tony Stevens
Finance Expert
About the author
Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.
Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.