Best Junior SIPP provider

A Junior SIPP (Self-Invested Personal Pension) is a retirement savings account which is specifically designed to help under 18s get invested for their retirement.

Currently, up to £2,880 can be contributed into a Junior SIPP per year. This is known as the annual allowance. One of the big benefits of a Junior SIPP is that the government adds a 20% top-up to all your contributions. That means your maximum allowance of £2,880 per year becomes £3,600 once the bonus is added. This bonus is known as pension tax relief.

Anyone (parents, grandparents, aunts, uncles and generous family friends) can contribute. However, the account can only be set-up by parents or a person with legal guardianship.

There are many benefits to opening a Junior SIPP. These include:

• Tax relief: The government adds 20% tax relief to all contributions. So, if you contribute the maximum annual allowable amount of £2,880, the government will top it up by £720, growing your annual savings to a total of £3,600.
• Tax-free investing: All monies placed into a Junior SIPP, and any growth it returns, are free from income and capital gains tax.
• Inheritance Tax mitigation: Paying into a Junior SIPP could help to reduce your Inheritance Tax bill (but speak to an estate planning professional for advice on this)
• Compound interest: Investing small amounts regularly can really add up. And that growth can be multiplied by the magic of compound interest. Compound interest is interest on interest. And it can turn relatively small amounts into large sums over many years. Remember however, that investments can fall and rise in value, and past performance is not a guarantee of future returns.
• Peace of mind about your child’s future: Getting started early gives your child a head start on retirement savings and provides a sense of security for you and them

A Junior SIPP does have some limitations, however:

• No access until retirement: The money will be locked in for a very long time. You need to weigh up whether your child could need this money sooner, for example, for a home deposit or higher education fees.
• Investing is not risk-free: While investing has historically provided an excellent way to generate returns over long-term periods, there are no guarantees. The value of your investments can rise and fall, and past performance is not a guarantee of future performance.
• At 18 the child has total control: Once they turn 18, they take over the management and could choose a more risky investment strategy than you are comfortable with. They could lose the gains you have made over the previous years with a bad decision.
• Annual contribution Limits: The maximum you can contribute is just £2,880 per year (£3,600 with tax relief). It is possible to save more into a Junior ISA (currently £9,000 per year).

A Junior SIPP account is held in a child’s name – they are the account-holder. But it must be managed by a parent or legal guardian until that child turns 18.

At 18, it converts into an adult SIPP (you don’t need to do anything – it will automatically convert) and the child takes over the management of the account. This means they have control over how the investment is managed, which provider it sits with, and how much is contributed from this point onwards.

Options at 18

When you take over management of your own Junior SIPP (now a regular adult SIPP) at age 18, you can choose to stay put and continue on the course your parents have set you on.

Or, you may wish to embark on a new investment strategy. Your risk appetite might be different to the risk appetite your parents had: perhaps you are comfortable with a higher level of risk, or maybe you want to dial down the risk level. In which case, you might want to transfer your investments to a different fund, a ready-made portfolio with a different risk rating, or build a portfolio centred around a different choice of stocks. These are big decisions with potentially large consequences. Seek advice if you are unsure on the right path to take, and remember that all investing holds risk, including the risk of losing everything that has been saved up for you for the past 18 years if you are not careful.

Alternatively, you may choose to transfer your SIPP to a new provider. While not many UK providers offer Junior SIPPs, a far larger number do offer SIPP accounts. So it’s a good time to assess whether you could be saving money on fees, or getting access to a better platform, with a wider choice of investment assets, or better customer service, for example, somewhere else. If you were enjoying zero service fees with Fidelity, adult SIPP fees will now start to kick in, so it may be a good time to take stock of what other providers are charging for portfolios of your value, and if you could be making savings elsewhere.

If you are invested in a ready-made portfolio, and are unhappy with the returns you have been receiving, you may wish to move to a platform that has higher average historic returns. Remember, however, that past returns do not guarantee future performance.

If you choose to transfer to a new provider:

• Check whether your provider charges a fee for transferring out.
• Determine whether you can transfer in specie (the investments stay in their actual form) or whether you will be forced to cash out of your positions and start again with the new provider. If you must cash out, ask yourself whether now is a good time to lock in whatever gains or losses you have made.

Accessing the money held within a Junior SIPP

Although the account-holder can manage their own account from the age of 18, they cannot access the money contained within it until they are at least 57. (From 2028, this age increases to 58, and it is likely to increase further in the future.)

Who can contribute to a Junior SIPP after the child turns 18

Even after the child turns 18, parents or other family members can still contribute into the Junior SIPP. And, of course, the account-holder can now make their own contributions if they wish.

A Junior SIPP can be a generous and thoughtful gift if you want to give a child a head start on a comfortable retirement.

However, it’s a very long-term commitment, so you need to think about whether that money could be needed sooner by the child when they reach adulthood, in which case, a Junior ISA may be a better option.

There are some key factors to consider when you are selecting a Junior SIPP provider:

• Fees: Does the platform offer competitive platform fees and trading fees? Will it work out more expensive to use one platform over another for the specific investment strategy you intend to follow? (E.g. investing only in US stocks, or using a ready-made portfolio)
• Investment options: Does the provider offer the stocks / bonds / funds / ETFs or other asset classes you want to invest in?
• Platform usability: Is it a platform you can easily use without becoming frustrated? Does it offer all the tools and features you want? Is it tailored to your skill level as an investor? (E.g. designed specifically for beginners?)
• Fund performance: If you intend to use a ready-made portfolio, how does your intended provider compare to others when it comes to generating returns? Use our interactive comparison charts to compare historical performance.
• Customer Support: How easy is it to access customer support? Do they offer support at the weekend, or only weekdays? Is there a customer service phone line, or is all support online? Which works better for you?