Junior SIPP v Junior ISA
Important information - investment value can go up or down and you could get back less than you invest. If you're in any doubt about the suitability of a Stocks & Shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.
What are Junior SIPPs?
A Junior SIPP is a type of pension for a child. You can open one for a child under the age of 18, although they’ll need to sign the application if they’re aged 16 plus.
Until they reach age 18, the Junior SIPP is managed by a parent or guardian who can make investment decisions on their behalf. Once they turn 18, their Junior SIPP matures into a SIPP and they can take control of their investments.
How do Junior SIPPs work?
Up to £2,880 can be paid into a Junior SIPP each year, with tax relief topping this up to an annual maximum of £3,600. Over 18 years, this could mean as much as £64,800 is paid into a child’s Junior SIPP – of which £12,960 is tax relief from the government.
Junior SIPP rules are exactly the same as those for an adult SIPP. Investments grow tax-efficiently and, when they get to access their pension, up to 25% of it is tax-free (subject to a maximum of £268,275), with the remainder subject to income tax.
Although their retirement savings may have started early, they won’t be able to access their SIPP until they reach the UK’s normal minimum pension age. Currently 55, this is set to rise to 57 in 2028 and is likely to have increased even further by the time your child reaches their fifties.
What are Junior ISAs?
Junior ISAs are a tax-efficient way to save and invest for a child.
There are two types:
- cash Junior ISAs, which are a tax-free savings account
- stocks and shares Junior ISAs, which give access to stock market investments.
Anyone can pay into a Junior ISA for a child but it must be opened by a parent or guardian. The account is managed by the parent until the child reaches age 16, when they can take control of running it.
How do Junior ISAs work?
Up to £9,000 can be paid into a Junior ISA (2024/25 tax year) each year. There’s no tax to pay on interest received on a cash ISA nor on any capital gains or dividends in a stocks and shares ISA.
Annual Junior ISA allowances may change but assuming they remain at the current £9,000, this could mean a maximum of £162,000 is paid in over 18 years.
Once they reach age 18, their Junior ISA matures into an ISA and they are able to access their money.
Why should I invest in Junior SIPPs and Junior ISAs?
Investing in Junior SIPPs and Junior ISAs for a child is a great way to help them with the inevitable expenses of adult life, whether that is a first car, a mortgage deposit or even retirement.
By starting early, the power of compound growth can transform even a small investment into something significant.
The length of time a child’s money is invested – potentially up to 57 plus years for a Junior SIPP – means you can also afford to take more risk with their investments. Although there are no guarantees, if you can afford to leave investments for longer, greater risk potentially means higher returns.
On top of this, Junior SIPPs and Junior ISAs are tax-efficient ways to save for a child’s future. This tax-efficiency helps their money grow faster.
Taking out a Junior SIPP or Junior ISA for a child can also be a really valuable introduction to investing. They will see the benefits of investing in stocks and shares, which can inspire them to keep up the habit when they reach age 18.
How to open a Junior ISA
It is quick and easy for existing customers to open a Junior ISA. Before applying, please read our Junior ISA Key Features and our Junior ISA Terms.
Open a Junior Stocks & Shares ISA
You must have an ISA or Trading Account before you can add or transfer a Junior ISA.
Transfer a Junior ISA
Once you have opened an account with ii, simply log in and click the 'cash & transfers' menu then select 'transfer in'.
Transfer a Child Trust Fund (CTF)
Transferring a CTF to a Junior ISA is easy and can be done when opening the ISA.
Learn more about our SIPP
Learn how to make the most out of your SIPP with our useful guides.