Your child might be decades away from retiring – but helping them build their pension early on will help them have a sizable pot once they reach retirement age. With the ability to deposit up to £3,600 per year without paying income or capital gains tax, a junior SIPP account is an excellent way to do so.
The UK’s traditional pension system is not adequate for older adults to maintain a comfortable life after retirement. The state pension pays out only £10,600 per annum and only after the age of 66, providing only 58% of previous earnings from work.
Pension investments are free from UK income and capital gain taxes and provide an automatic 20% boost from the government.
Gifts to your child’s pension are often covered by inheritance tax exemptions and could fall outside your estate for inheritance tax purposes.
Overall, it’s an excellent and cost-efficient way to gift your child a 20-year head start.
Junior SIPP Providers – Our Top Picks
| Name | Score | Visit | Disclaimer | |
|---|---|---|---|---|
 | 7.9 | Visitajbell.co.uk | ||
 | 8.3 | Visithl.co.uk | ||
 | 6.5 | Visitfidelity.co.uk | ||
 | 6.5 | Visitbestinvest.co.uk |
Best Junior SIPPs Reviewed
We've gone through the top junior SIPP providers in the UK – here's what we found.
Overall best junior SIPP account – AJ Bell
Best for financial advice – Hargreaves Lansdown
No annual charges – Fidelity
No transaction fees for funds – Bestinvest
The UK’s first online self-invested personal pension provider, AJ Bell, remains one of the major investment platforms in the country. Despite its size and calibre, it’s still one of the cheapest pension providers available.
Besides the low costs, the sheer market reach sets AJ Bell apart from the competition. You have over 2,000 funds, as well as stocks, bonds, gilts, and investment trusts, at your disposal.
I appreciate how AJ Bell provides a wide variety of investment options, making it ideal for DIY investors like me. The low fees and regular investment scheme really help to keep costs down while building a solid pension pot.
By activating regular investments (starting from £25 per month), you can ensure that you won’t miss out on growing your child’s pension pot. The regular investment scheme also lowers the per-deal investing fee to £1.50.
One caveat is that the minimum contribution to a SIPP is £1,000, including the tax relief. This means that you have to start with at least £800, and the government will add £200. Albeit still accessible, the threshold is at the high end of the market.
Nevertheless, AJ Bell is a trusted name in the UK with competitive charges for its SIPP accounts. If you are confident with a DIY approach to managing your child’s retirement account, it’s an excellent choice.
- Wide range of financial products available
- Annual charges capped for share investments
- Ability to earn interest on cash
- Offers tax-efficient investments, including ISAs and SIPPs
- DIY only, no expert help available
- Annual charges for fund investments are not capped
- High minimum investment threshold
Much like AJ Bell, Hargreaves Lansdown is a veteran within the UK’s investment market, trusted by more than 1.7 million clients across the country.
With annual charges varying from 0.45% to 0.1%, it's by no means the cheapest option available. Yet, it can be a suitable choice for those who require financial advice whilst managing a junior SIPP to maximise returns and maintain tax benefits.
I find Hargreaves Lansdown’s financial advice particularly useful for those who want expert guidance. While the platform isn't the cheapest, the advice and personalised service are well worth the investment for me.
The financial advice services are flexible and require no long-term commitment. It’s possible to get investment advice to help build a diversified portfolio and help with long-term financial planning, which includes retirement planning.
The flexibility allows clients to set up milestones on the growth of their child’s junior SIPP, and check in with a financial adviser along the way to ensure that they are on the right track.
- Flexible financial advice
- Competitive interest rates for cash
- A trusted provider
- Strong reputation for customer service and support
- Platform is not very user-friendly
- Annual charges are steep for many
- Minimum cost for financial help starts from £495
One of the largest investment companies online, Fidelity, is among the top-rated providers for regular and junior SIPPs alike. The outfit is truly set apart with the wealth of options available. From funds to bonds, it’s an excellent choice for those looking for a low-cost, DIY platform.
It’s particularly strong in its collection of over 3,000 funds. While Fidelity’s own funds are free to deal, the firm also negotiated for lower charges for over 200 funds. There are also no charges for pension transfer or setting up an account.
Fidelity’s no annual charges and discounted funds make it a strong choice for cost-conscious investors. I particularly like the range of over 3,000 funds available, though I would prefer a quicker account verification process.
If DIY is not your thing, you can also browse through Fidelity’s numerous ready-made portfolios. It’s by no means an equivalent of HL’s financial planning service, but it is a low-cost alternative with an average service cost of 0.35%.
- A wide array of investment options
- Discounted funds available
- No annual charges
- Excellent educational resources for beginner investors
- Account verification is long
- High broker-assisted dealing fee of £30
- Limited range of non-fund investment options, like stocks or ETFs
Bestinvest offers a wide range of investments for its junior SIPP product, and levies no fees for fund dealing. While share transactions are still charged, it’s a low £4.95 – which is among the cheapest available on the market as of this writing.
I appreciate Bestinvest’s low fees for fund dealings and the easy transfer process. It’s a great option for budget-conscious investors like myself who want to avoid high charges while still having access to a variety of investment choices.
The provider also makes transferring a breeze – there are no charges to transfer an existing SIPP, and they will cover £500 of the exit costs if your current provider charges any. Considering the above-average interest on cash, deductions on transfer costs, and free-of-charge fund investing, it’s an excellent choice for budget-conscious investors.
- Wide range of educational materials
- Easy to navigate platform
- Excellent collection of ready-made portfolios
- No transfer fees when moving an existing SIPP to Bestinvest
- Unexpected charges may occur – such as £30 fee for phone-assisted investing
- Higher ongoing charges for some of the ready-made portfolios
- Limited range of advanced tools for more experienced investors
How Does a Junior SIPP Work?
A Junior SIPP (Self-Invested Personal Pension) operates in a very similar way to a regular SIPP, but it's specifically designed for children. It allows parents or legal guardians to manage the investment funds on behalf of the child until they reach adulthood. Like any other pension scheme, a Junior SIPP offers tax benefits and the opportunity to take control of investments.
When I first came across the concept of a Junior SIPP, I was intrigued by the idea of securing a financial future for my child early on. It’s amazing how, with just a bit of foresight, you can ensure that your child will have a solid financial cushion when they grow older. Setting up the pension was straightforward, and I found that the flexibility it offered in terms of choosing where to invest was a real plus.
A legal guardian or a parent can set up a pension , and while the child is a minor, they’ll manage it on their behalf. Once the child reaches the age of 18, they gain full control of the account and can make their own investment decisions, which is an empowering step towards financial independence.
It’s important to note that the funds in a Junior SIPP are locked until the child reaches 55 years of age, although recent government discussions suggest the age limit may increase to 57 by 2028. While the specifics may change, it’s wise to plan around the potential of 57.
Once the child reaches the required age, they can take up to 25% of their SIPP as a tax-free lump sum. Any additional withdrawals will be subject to income tax based on their marginal rate. From my own experience, this long-term view of saving for retirement is something I’m really glad I set up early. Watching it grow and knowing that it will be there when my child reaches retirement age feels incredibly reassuring.
How much money can you put into junior SIPPs?
Tax benefits typically make SIPPs quite special. As long as annual contributions remain within the specified limit set by the government, the returns in a junior SIPP are exempt from income tax and capital gains tax.
Self-invested personal pension and tax rules
The annual allowance for the tax year 2023/2024 is set at £3,600, which includes the basic tax relief of 20%. Here’s how it works:
The government tops up any money you pay into a junior SIPP, or any SIPP account for that matter, by 20%. This means that as a parent or legal guardian, you only have to contribute £2,880 to max out on your annual allowance, and the government will add £720 to complete it to £3,600.
If you invested £2,880 every year until the child reaches the age of 18, it could be worth an estimated £420,310 by the time your child reaches the age of 60 with an average return rate of 5%.
Junior SIPP investment options & ideas
A SIPP essentially functions as a wrapper for investments (incidentally called tax wrappers). The idea is that you can fund your account, and make investments in various financial products, from stocks and shares to funds, ETFs, or bonds, and earn money through capital appreciation.
Additionally, many junior SIPP providers, and all of them on our list, allow savers to earn interest on cash – albeit offering much lower interest rates compared to regular savings accounts.
Here’s a breakdown of the most common investment vehicles as well as their risk exposures and average returns.
Risk Exposure | Average Returns | |
|---|---|---|
Stocks | High | 8-10% |
Mutual funds | Medium to high | 4-10% |
Index funds | Medium | 4-10% |
Bonds | Low to medium | 1-5% |
ETFs | Medium to high | 4-10% |
Cash and cash equivalents | Low | 1-2% |
Many that invest through a SIPP seek low-risk, long-term investment opportunities – for which index funds make an excellent choice. Index funds track a specific market benchmark, or “index”, such as the largest 500 US companies per market cap (S&P500).
What makes index funds such a safe haven for investors is that these funds try to be the market. When you invest in an index fund, you essentially trust that the market as a whole will grow, rather than a specific company.
Varying rates of growth
According to a recent report, it costs about £157,562 to raise a child from the cradle until they turn 18. They might be little bundles of sunshine, but they sure are costly – naturally, not all of us can create £2,880 out of thin air every year.
Yet, even a more modest amount of £1,200 per year yields some pretty great results when started early. To illustrate, we’ll take a moderate rate of 5% as the average return rate again – here’s how projected returns can look:
Child’s Age | Monthly Contribution (after government tax relief) | Annual Contribution | Total contribution (Until the child is 18) | Estimated Value at the Age of 60 | Estimated Growth by the Age of 60 | Tax Relief |
|---|---|---|---|---|---|---|
0 | £100 | £1,200 | £27,000 | £175,129 | £148,129 | £5,400 |
5 | £100 | £1,200 | £19,500 | £114,541 | £95,041 | £3,900 |
10 | £100 | £1,200 | £12,000 | £64,005 | £52,005 | £2,400 |
As shown above, the earlier you start a junior SIPP, the better. Even if your annual contributions don’t max out the allowance, setting aside £100 every month can provide your child with a significant head start. For comparison, the average pension pot in the UK for the 55-64 age bracket is £107,300.
Who can set up and make contributions to Junior SIPPs?
Parents and legal guardians can set up a junior SIPP for a child from the day they are born until they are 18. If the child is older than 16, they may have to give consent and be asked to sign the paperwork.
While only parents and legal guardians are allowed to open and manage a SIPP, anyone can make contributions; grandparents, cousins, family friends – you name it. One thing to keep in mind is to remain within the annual allowance of £2,800 (which amounts to a total of £3,600 with the 20% tax relief).
How do I pass a Junior SIPP on to my child?
What happens if my child withdraws early from their SIPP?
Finding the Best Junior SIPP
Finding the best junior SIPP provider will depend on your personal preferences, but there are a few points to consider when looking for one;
DIY, ready-made, or expert-managed?
How much would you like to be involved in the management of your child’s SIPP? If you are confident in your investment knowledge and experience, or alternatively only seek to drip feed into index funds, the DIY option may be the right choice for you. It’s also often the most cost-effective way.
Ready-made portfolios may incur additional charges, take Fidelity’s, for example. They are usually put together by investment professionals and are categorised by factors like risk exposure, preferred assets, and investment goals, such as growth or income.
Expert management is the costliest, yet safest option. You can opt for a service such as HL to have a financial advisor lead the way for you.
How much does it cost?
Be mindful of the charges, as they can compound in the same way investment returns do. Over time, even seemingly small fees can eat into your child’s pension savings. Below are the three main types of charges to keep an eye on:
Annual custody charge for shares: This fee typically ranges from 0.1% to 0.45%, and is often capped annually. It covers the cost of holding shares within the Junior SIPP and usually decreases as your investment grows. For example, a provider might charge 0.45% on the first £25,000 and reduce the fee to 0.25% above that amount. Always check if there’s a cap in place, as this can make a big difference in the long run.
Annual custody charge for funds: This fee is generally similar to the custody charge for shares, typically ranging from 0.1% to 0.45%, but unlike share custody charges, it’s not usually capped. That means as your investments grow over time, so too could the amount you pay in fees. Since many people begin with low-cost index funds, it’s essential to check exactly how these fees are structured with your provider. Some platforms include this charge within a broader platform fee, while others break it down separately — I found this out the hard way when I realised one provider’s uncapped fee could quietly eat into returns over time.
Investment fees: Also known as trading fees, these apply whenever you make an investment—such as buying a share or a fund unit. Most UK SIPP platforms charge a flat fee per trade, typically ranging from £1.50 to £12. To reduce costs, it’s usually smarter to accumulate cash and invest in larger, less frequent lump sums, rather than making small, regular trades. This strategy helps minimise the effect of fixed trading charges.
What is the market reach like?
This applies the most if you are a seasoned investor – you can, of course, invest in several index funds and follow a “buy-and-forget” strategy. But if you’re looking for more active management of your child’s pension, you should consider how vast your preferred platform’s market reach is.
FAQ
Are Junior SIPPs worth it?
What is the disadvantage of a junior SIPP?
What is the tax relief on a junior SIPP?
Conclusion
When selecting the best Junior SIPP provider, it’s important to consider how much involvement you want in managing your child’s pension. If you prefer a DIY approach, look for a platform that offers low fees and a wide range of investment options. However, if you prefer expert advice and guidance, consider a provider with flexible financial planning services, even if it comes with higher fees.
Among the options available, AJ Bell stands out as the overall best Junior SIPP provider. Despite a slightly higher minimum contribution requirement, it offers a wide range of investment choices, including over 2,000 funds, stocks, and bonds, making it a flexible and low-cost option for parents confident in managing their child’s pension. AJ Bell’s regular investment scheme further reduces fees, making it an excellent choice for long-term growth. With its strong reputation and competitive charges, it’s a solid choice for anyone looking to build their child’s pension with a hands-on approach.
