A Junior Self-Invested Personal Pension (Junior SIPP) is a long-term savings plan designed to help parents and guardians invest for their child’s future retirement. It works similarly to a standard SIPP, but the funds remain locked until the child reaches age 55 (rising to 57 in 2028).
This guide explains how Junior SIPPs work, their benefits, contribution limits, tax advantages, and why they can be a powerful financial tool for securing a child’s future.
1. How Does a Junior SIPP Work?
A Junior SIPP is a tax-efficient pension that allows parents or guardians to contribute money on behalf of a child. The funds are then invested in stocks, bonds, and funds, growing over time.
✔ Parents or guardians manage the account until the child turns 18, after which they take control.
✔ Investments grow tax-free, meaning no income tax or capital gains tax applies.
✔ The child can access the pension at age 55 (or later, depending on future pension rules).
2. Contribution Limits for Junior SIPPs
The maximum contribution for a Junior SIPP is £3,600 per tax year. This includes:
✔ £2,880 paid by parents or guardians.
✔ £720 added by the government as 20% tax relief.
This means every £80 contributed is boosted to £100, making it a highly efficient way to save for the future.
3. Tax Benefits of Junior SIPPs
✔ Tax-Free Growth – Investments grow without income or capital gains tax.
✔ Government Tax Relief – Contributions receive a 20% boost from the government.
✔ Inheritance Tax Benefits – Contributions may help reduce inheritance tax liabilities.
These tax advantages make Junior SIPPs a powerful long-term investment tool.
4. Investment Options in Junior SIPPs
Junior SIPPs allow parents to choose how the money is invested, including:
✔ Stocks & Shares – Higher growth potential but more risk.
✔ Bonds & Fixed Income – Lower risk, providing stability.
✔ Funds & ETFs – Diversified investments for balanced growth.
✔ Ethical & ESG Investments – Sustainable funds focused on environmental and social impact.
Parents can adjust investments based on market conditions and long-term goals.
5. Who Can Open a Junior SIPP?
✔ Only parents or legal guardians can open a Junior SIPP.
✔ Grandparents and relatives can contribute, but they cannot manage the account.
✔ The child takes control at age 18, but funds remain locked until age 55.
6. Is a Junior SIPP a Good Investment?
✔ Long-Term Growth – Investing early allows compound interest to work over decades.
✔ Tax Efficiency – Government tax relief boosts contributions.
✔ Retirement Security – Helps secure a child’s financial future.
While Junior SIPPs are locked until retirement age, they provide significant financial benefits over time.
Final Thoughts
A Junior SIPP is a powerful way to invest in a child’s future, offering tax-free growth, government contributions, and long-term financial security. While funds remain locked until retirement age, the benefits of early investing make it a valuable financial tool for parents looking to secure their child’s future.
What happens to the SIPP / fund should the child die:
A) Before they reach the age of 18 years
B) They are between the age of 18 and 57 years
If a child with a SIPP (Self-Invested Personal Pension) passes away, what happens to the fund depends on their age and whether they’ve accessed it:
A) If the child dies before age 18:
The SIPP will usually be passed on to their nominated beneficiaries (often the parents or legal guardians) entirely tax-free, provided the death occurs before age 75. The funds can be taken as a lump sum, income, or designated to another pension.
B) If they are between 18 and 57 (i.e., before pension access age):
The same general rules apply. If the child (now an adult) dies before age 75, the SIPP can be inherited tax-free by their nominated beneficiaries. If they die after age 75, any withdrawals by the beneficiaries will be taxed at their marginal rate.
💡 It’s important to ensure nomination of beneficiaries is up to date, as this gives the pension provider guidance on who should receive the funds.