Junior SIPPs are a self-invested personal pension product designed for those under the age of 18. This type of pension account offers a tax-efficient way of saving for your child’s retirement. In this guide, we compare and review the best Junior SIPPs from several of the UK’s top SIPP providers including Hargreaves Lansdown and AJ Bell Youinvest.
Best Junior SIPPs Compared
We have ranked Hargreaves Lansdown as the best Junior SIPP in 2022 due to its market range and added value. Our picks for the best Junior SIPP are based on over 7,000 votes in our annual awards, our own experiences testing the accounts as well as an in-depth comparison of the features that make them stand out compared to alternatives.
Hargreaves Lansdown Junior SIPP
Best Junior SIPP 2022Through Hargreaves Lansdown, you can invest in a wide range of UK shares, international shares, investment funds (there are over 3,000 funds on the platform), investment trusts, ETFs, and bonds. It’s worth noting that you can trade funds for free.
Managed or DIY?
*Shares charges are capped at £200 per year. Funds are charged at 0.45% for the first £250,000. There is no charge for buying funds, but shares are charged at £11.95 per deal or £5.95 if you do over 20 deals per month.
AJ Bell Youinvest Junior SIPP
Best for low-cost Junior SIPP investingWith this Junior SIPP, you can invest in UK shares, international shares, investment funds, investment trusts, ETFs, and bonds. And there’s a regular investment service that allows you to make regular investments from £25 per month cost-efficiently.
Managed or DIY?
What is a Junior SIPP?
A Junior SIPP is a retirement account designed for children.
Junior SIPPs (Junior Self Invested Personal Pensions) are similar to regular SIPP accounts, however, they can only be opened for those under the age of 18. They must be opened by a parent or legal guardian on behalf of the child.
With a Junior SIPP, you can contribute up to £2,880 per year into the account. Contributions are subject to 20% tax relief which means that if you were to contribute the full annual allowance of £2,880, the government would contribute another £720 for you, taking the total contribution to £3,600.
As with a regular SIPP, money in a Junior SIPP cannot be accessed until the account owner turns 55 (57 from 2028 onwards). This means that the money invested is locked away for the long term.
What can you invest in with Junior SIPPs?
With Junior SIPPs, the investment options vary from provider to provider. Some SIPP providers, for example, offer access to more stocks and investment funds than others do. However, popular providers such as Hargreaves Lansdown, AJ Bell Youinvest, and Fidelity all offer access to a wide range of investments including:
You can also keep money in cash within the SIPP if you wish to. This can be useful if you have not decided where you want to invest the money, or you are waiting for a better time to invest.
How you invest your child’s money within a Junior SIPP is down to you. Until the child turns 18, you are responsible for managing the SIPP and have full control over the investments within the account.
Advantages of Junior SIPPs
Junior SIPPs have several advantages.
One obvious advantage is that they can help you give your children a financial head start. Investing money for your children while they are young could help them build up considerable pension savings over the long term. This is due to the power of compounding. Compounding is the process of generating earnings on an asset’s past earnings. Over time, it tends to result in the exponential growth of an investor’s money.
Another advantage of Junior SIPPs is that they are tax-efficient. Investments within a SIPP are not subject to income or capital gains taxes. Meanwhile, contributions come with 20% tax relief. This means that for every 80p you pay into your child’s Junior SIPP, the government will add another 20p for you, taking the total contribution to £1.
Family and friend contributions
A third advantage is that anyone can contribute to a Junior SIPP, including grandparents. It’s worth noting that there can be Inheritance Tax (IHT) exemptions for grandparents who make contributions to Junior SIPPs for their grandchildren.
Disadvantages of Junior SIPPs
One of the main disadvantages of Junior SIPPs is that the money within the account is locked away for the long term. At present, you cannot access money within a Junior SIPP until age 55, however, this age is set to rise to 57 in 2028 and likely to rise further going forward. So, with this type of investment account, you must be comfortable gifting the money and locking it away for decades. Bear in mind that tax rules can change over time. So, there’s no guarantee that Junior SIPPs will always offer the level of tax-efficiency that they do today.
Alternatives to Junior SIPPs
There are several alternatives to Junior SIPPs that may be worth considering depending on your requirements and financial circumstances.
One such alternative is a stakeholder pension. This is a type of managed pension that’s offered by some financial services companies in the UK such as Aviva. As with Junior SIPPs, you can invest £2,880 per year into these pensions, and contributions come with 20% tax relief.
One benefit of stakeholder pensions is that they allow you to hand over the responsibility of choosing investments to the account provider. This means they can be less time-consuming to manage.
On the downside, stakeholder pensions usually have far less investment options than Junior SIPPs. Typically, you can only invest in a limited range of funds, and you cannot invest in individual shares.
Another alternative to a Junior SIPP is a Junior ISA. This is a tax-efficient investment account that is open to those in the UK aged under 18. As with Junior SIPPs, all gains and income within the account are tax-free.
One of the main advantages of a Junior ISA, compared to a Junior SIPP, is that the annual allowance is significantly higher. Currently, the annual allowance for Junior ISAs is £9,000. Another advantage is that money can be accessed by the account owner at age 18.
On the downside, contributions into a Junior ISA do not come with tax relief. So, any contributions into the account won’t be topped up by the government.
Junior SIPP FAQs:
Is a Junior SIPP a good idea?
There are many benefits to opening and contributing to a Junior SIPP.
By putting money into a Junior SIPP for your child, you can potentially give your child a financial head start. Money in a Junior SIPP has decades to grow meaning that by the time the child reaches retirement age, they could have a considerable amount of pension savings.
Contributing to a Junior SIPP is also a tax-efficient way of investing. Contributions come with 20% tax relief, and all gains and income within the SIPP are tax-free.
There are drawbacks to be aware of, however. One is that money within a Junior SIPP cannot be accessed until 55 (57 as of 2028).
Another downside is that you are responsible for managing the money in the account.
What happens to a Junior SIPP at 18?
When your child turns 18, the Junior SIPP automatically becomes a regular SIPP, and control of the account is passed on to the child. This means that from the age of 18, they are responsible for managing the money in the account and deciding how and where it is invested. You can find out more about regular SIPPs and how they work here.
How much can I put in a Junior SIPP?
With a Junior SIPP, you can contribute up to £2,880 per year. Contributions are subject to 20% tax relief which means that for every 80p you put in, the government will add another 20p, taking the total contribution to £1.
So, if you contribute the full annual allowance of £2,880, the government will top this up to £3,600.
How many Junior SIPPs can you have?
You can have as many Junior SIPPs as you want. However, you can only invest a total of £2,880 (the annual allowance) across all your accounts.
How much can you invest in a Junior SIPP?
You can contribute a total of £3,600 per year into a Junior SIPP (after tax relief) and there is no limit as to the level that the money invested within the account can grow to.
However, one thing to consider is the Lifetime Allowance (LTA). This is the total amount of money you can build up in your pension accounts while still enjoying the full tax benefits and not paying tax surcharges in retirement. At present, the LTA is £1,073,100 but this figure is likely to rise over time to account for inflation.
What age can you open a Junior SIPP?
You can open a Junior SIPP for any child under the age of 18.
Be aware, however, that if the child is over the age of 16, they may need to provide consent by signing the application form.