It may feel odd to look at your toddler and imagine planning for their retirement, but selecting the best Junior SIPP provider could set your child on the path to financial security. 

While planning a pension for your child might not be standard playground talk, the recent 56% surge in Junior SIPP contributions (up to £67 million in 2021 from £43 million in 2017)¹ makes it clear that many parents (and grandparents) are looking for long-term financial strategies for their kids. 

These investment accounts offer enticing features like tax efficiency but also come with risks such as market volatility and limited access to funds until retirement age.

With a focus on accuracy, the EveryInvestor team has carried out extensive research as part of our commitment to providing reliable and valuable insights to help you make informed decisions about the best SIPP.

Keep reading to navigate this often overlooked yet crucial financial planning tool.

What Is a Junior SIPP?

A Junior SIPP is a Self-Invested Personal Pension designed for children. 

With this product, parents, grandparents or guardians can build a tax-efficient retirement pot on behalf of a child until that child turns 18.

Something to consider

SIPP funds will only become available when the child turns 57 (which will be the new pension age starting from 2028).²

In fact, this minimum age could possibly be raised even further during the child’s lifetime. 

On the other hand

A SIPP set up by parents or grandparents may help free up some of the money the child would otherwise have saved towards their pension during their working life.

What are the Best Junior SIPPs for Children In the UK?

Junior SIPPs, or Self-Invested Personal Pensions, offer a tax-efficient way to save for children’s future.

Some of the best options in the UK include Hargreaves Lansdown Junior SIPP, AJ Bell Youinvest Junior SIPP, and Fidelity Junior SIPP.

These platforms provide a range of investment options, low fees, and user-friendly interfaces for managing the account.

It is important to consider factors such as fees, investment options, and customer service when choosing a Junior SIPP for children in the UK.

By comparing different providers and considering the specific needs and goals for the child’s future, parents can select the best option to help secure their financial future.

How Does a Junior SIPP Work?

A Junior SIPP works in the same way as an ordinary SIPP where contributions attract pensions tax relief and are invested in a variety of assets, the growth of which is also untaxed.³ 

Before the child turns 18, a parent or legal guardian usually takes care of the SIPP account and makes the investment choices.

As with other pensions, a 25% tax-free lump sum will also be available upon retirement. 

Who Is Eligible for a Junior SIPP?

Any child under the age of 18 who is resident in the UK is eligible to have a Junior SIPP opened in their name.

Anyone can contribute to the child’s SIPP.⁴

Which Providers Offer the Best Junior SIPPs?

Providers that offer the best Junior SIPPs often include firms that are well-established in the financial industry and known for their robust investment platforms and comprehensive customer service. 

Companies such as Hargreaves Lansdown, AJ Bell, and Fidelity frequently receive high marks for their Junior Self-Invested Personal Pensions (SIPPs) thanks to their wide range of investment options, user-friendly online interfaces, and educational resources that support young investors and their guardians.

However

Who the ‘best’ provider is will vary depending on individual circumstances, including investment goals, the level of service required, and cost considerations. 

Therefore, guardians should conduct thorough research and possibly consult a financial advisor to ensure that their chosen Junior SIPP aligns with their long-term financial goals for their child.

A quick look at some of the well-known names in the industry may help you with your own comparisons. 

Hargreaves Lansdown

Hargreaves Lansdown offers an extensive selection of funds and shares, coupled with valuable research and tools that may aid clients in making informed investment decisions. 

Hargreaves Lansdown’s Junior SIPP fee is relatively high at 0,45% for assets up to £250,000, which tapers off as the portfolio size increases. 

Share trades are priced at £5,95 per deal, while fund transactions are free.⁵

With a minimum investment of just £1, the platform offers a variety of features, including innovative tools, comprehensive research options, and a diverse range of over 2,500 investment choices such as UK and overseas shares, and investment trusts.

Fidelity

Fidelity provides a diversified range of investment options and resources tailored to help families understand and manage their Junior SIPP effectively.

Some key advantages of Fidelity‘s Junior SIPP include the lack of platform fees and fund transaction fees. 

Online share trades are priced at £7,50 each and dividend reinvestment costs £1,50.⁶ 

You can either set up a £20 per month regular savings plan or make a £800 lump sum deposit to get started.⁷ 

In addition, Fidelity provides a user-friendly app and online platform, simplifying the process for new investors.

AJ Bell 

AJ Bell charges relatively low fees and provides a straightforward platform that appeals to both novice and experienced investors. 

The AJ Bell Junior SIPP offers a broad array of investment choices, with fund custody charges of 0,25% on assets up to £250,000 (dropping to 0% for the portion of your portfolio exceeding £500,000). 

A regular investment service is also available, allowing monthly contributions from £25. 

Share trading fees start at £9,95 but fall to £4,95 for those making more than 10 trades per month.⁸ 

The option to link your child’s SIPP to your own account adds extra convenience.

Bestinvest

With the Bestinvest Junior SIPP, you have the bonus of access to qualified investment experts for advice, with a minimum deposit of just £1.

The company offers a varied range of investments along with free fund transactions. 

Share trades are charged at £4,95, and the platform charge works according to a sliding scale between 0,2% and 0,4% based on the investment amount. 

Be cautious of additional fees like the £30 charge for telephone share dealing.⁹

How Did We Rank the Best Junior SIPPs?

We ranked the best Junior SIPPs by taking into account a multifaceted set of criteria, designed to reflect the needs and priorities of young investors and their guardians. 

Our ranking process involved an in-depth evaluation of several key factors:

• Cost-Effectiveness: We examined annual and trading fees to ensure that the Junior SIPP’s management costs are reasonable and do not erode investment growth.
• Investment Options: The variety and quality of available investment choices were scrutinised. Multiple fund, share, and other investment vehicle providers scored higher because they offer a more flexible approach to building a diversified portfolio.
• Platform Usability: Guardians who manage the account and invest for the child need an easy-to-use online platform and mobile apps.
• Customer Support: We evaluated the level of customer service, focusing on the availability of professional guidance and support, which is particularly important for those new to investing.
• Educational Resources: Providers with strong educational content to help young investors and their guardians understand SIPPs and investment principles were rated well.
• Performance and Reputation: The historical performance of the provider’s investment options and their overall reputation in the market were also taken into account as indicators of reliability and trustworthiness.

By examining these aspects, we aimed to provide a comprehensive and balanced list of providers, tailored to assist families in making an informed choice when selecting the best Junior SIPP provider for their needs. 

It is important, however, for individuals to consider their personal circumstances and possibly seek independent financial advice before making a final decision.

How You Choose the Best Junior SIPP for Your Child?

To choose the best Junior SIPP for your child, you will need to take into account whether a particular product meets your investment goals, scrutinise the provider’s track record, have a look at what customers think, and speak to a SIPP expert.

Measure Compatibility With Your Investment Goals 

Start by outlining your financial objectives for the SIPP and select a provider that aligns with these goals.

Assess Long-Term Performance & Reputation

Look at historical data and third-party ratings to evaluate the provider’s long-term reliability.

Review Customer Feedback & Testimonials

Examine user reviews on independent websites such as Trustpilot to gauge customer satisfaction.

Consult a Qualified SIPP Adviser

For a customised strategy, consider speaking with a certified SIPP advisor who can help match your financial situation with the right plan.

What Are the Benefits of Junior SIPPs?

The benefits of Junior SIPPs encompass tax efficiency, the power of compounding, and the fact that anyone may contribute.

Compounding Returns

The earlier you start investing, the more time your money has to grow through compound interest, which can significantly boost the end sum.

Consider this scenario

Sarah starts a Junior SIPP for her newborn daughter Emily, contributing the tax-free limit of £2,880 (which becomes £3,600 once tax relief is applied) annually until Emily turns 18.¹⁰ 

For the sake of this illustration, let us assume Sarah’s contributions are going into a SIPP deposit account and staying there. 

At a 4% annual interest rate, the money in this deposit account may grow to about £97,215 by Emily’s 18^th birthday. 

Left to grow without additional contributions, the pension pot may reach approximately £487,853 by the time Emily turns 60.

Remember

Investing carries risk, and your money may decrease as well as increase. 

Tax Efficient

Contributions to Junior SIPPs receive tax relief, and investment growth is free from income and capital gains tax.¹¹ 

Tax relief

You can contribute up to £2,880 every year and receive tax relief in the form of a government top-up of 20%, meaning your contribution will actually amount to an annual £3,600.¹²

Another thing

Contributing to a Junior SIPP could potentially reduce your estate for Inheritance Tax (IHT) purposes, as contributions may fall under the annual £3,000 IHT gifting allowance.¹³

Speak to a qualified tax advisor if this is something you are interested in.

Important

Pensions tax relief rules may change in future, so be sure to stay informed on the relevant legislation.

Family & Friend Contributions

Anyone, including grandparents, can make contributions to a Junior SIPP, making it easier to accumulate a larger pension pot for the child.

What Are the Risks of Junior SIPPs?

The risks of Junior SIPPs, much like those of any investment vehicle, are multifaceted and require careful consideration, especially given that these plans are intended to secure a child’s financial future. 

Some of the primary risks include investment risk, limited access, and performance risk.

Investment Risk

The value of investments can go up as well as down. 

Given the long-term nature of Junior SIPPs, the invested capital is subject to market fluctuations and economic changes. 

Therefore, there is no guarantee that the investments will perform as expected, which could potentially lead to reduced returns or, in some cases, loss of the original capital.

Inflation Risk

Over time, inflation can erode the purchasing power of money. 

If the investment growth in the Junior SIPP does not keep pace with inflation, the real value of the funds available at retirement could be less than anticipated.

Liquidity Risk

Junior SIPPs are designed as long-term investment vehicles, with funds generally not being accessible until the child reaches retirement age. 

This means the money is tied up and cannot be readily accessed, even in cases of financial emergency.

Charges & Fees Risk

Management fees, transaction fees, and other charges associated with Junior SIPPs can vary significantly between providers. 

High charges can eat into investment returns over time, particularly if the investment performance is modest.

Regulatory Risk

Changes in government policy, taxation, and pension regulations can impact the benefits and rules surrounding Junior SIPPs. 

Such changes could potentially alter the attractiveness or the terms of these pension schemes.

Performance Risk

This risk refers to the potential for selecting investment options within the SIPP that do not perform as well as expected, impacting the overall growth of the pension pot.

Guardians and investors should consider these risks carefully, conduct thorough research, and, where necessary, seek professional financial advice to ensure that a Junior SIPP aligns with their child’s best interests.

What Costs Are Associated With Junior SIPPs?

The costs associated with Junior SIPPs can vary considerably depending on the provider and the specific investment choices made within the pension. 

Generally, costs may include set-up fees, annual account fees, and trading fees. 

Set-Up Fees 

Some providers may charge an initial fee for setting up the Junior SIPP. 

This is a one-time cost incurred at the beginning of the investment.

Annual Management Charges

These are ongoing fees charged by the provider for managing the SIPP. 

They are usually expressed as a percentage of the invested assets and can significantly impact the overall return on investment over time.

Trading Fees

If the SIPP involves buying and selling investments such as stocks, bonds, or funds, transaction fees may apply. 

These fees are charged each time a trade is made and can vary depending on the type of investment and the provider.

Fund Management Fees

If the investments within the SIPP are in managed funds, there will be fees associated with these funds, known as the Ongoing Charges Figure (OCF). 

This covers the cost of fund management and other expenses related to the operation of the fund.

Transfer Fees

Should you decide to transfer the Junior SIPP to another provider, transfer fees may be charged. 

These can vary widely between providers.

Exit Fees

Some providers may charge a fee if the SIPP is closed or funds are withdrawn (subject to the rules governing withdrawals from a SIPP).

Inactivity Fees

A few providers might charge a fee if the account is inactive for a certain period.

It is important for parents or guardians to review and compare the fee structures of different Junior SIPP providers, taking into account both the immediate and long-term costs, and how these might affect the overall growth of the pension fund. 

It is also advisable to read the fine print and ask about any potential hidden costs that might not be immediately apparent.

How Do You Open a Junior SIPP?

To open a Junior SIPP, you may have to fill in an application form, either online or on paper, and make an initial deposit.

Identification documents will be required for both the child and the parent or guardian, as well as the parent or guardian’s National Insurance number.

If the child is 16 or older, you will also need their National Insurance number and they will have to be present to sign that they agree to the tax relief declaration.  

Remember

Only a parent or guardian can open an account on behalf of a minor child. 

What Are the Alternatives to Junior SIPPs?

The alternatives to Junior SIPPs include a range of savings and investment options, each with its own set of features, benefits, and considerations. 

These alternatives provide different ways to save for a child’s future.

Junior Cash ISA

A Junior Cash Individual Savings Account (ISA) is a tax-free option for children under 18, with an allowance of £9,000 for the 2023/24 tax year.¹⁴

Offering either fixed or variable interest rates, a Junior Cash ISA generally provides lower returns than a Junior SIPP but comes with less investment risk. 

More importantly, a child could take control of the ISA at 16 and can access the funds at 18, whereas they would have to wait until retirement age with a Junior SIPP.

Junior Stocks & Shares ISA

A Junior Stocks & Shares ISA is similar to a Junior Cash ISA in all ways except that growth occurs thanks to a range of stocks, funds, and bonds, and any gains are untaxed. 

Unlike a Junior SIPP, funds held in an ISA are accessible at age 18, giving this product an edge for those who may need earlier access to their money.

Children’s Savings Account

A children’s savings account is designed for minors and typically offers special rates for certain savings thresholds. 

It is a straightforward, low-risk way to save for a child’s future. 

Unlike funds in a Junior SIPP, money in these accounts can be easily accessed for education or other immediate needs.

Premium Bonds

Premium bonds are a government-backed savings vehicle that offers the chance to win tax-free prizes instead of guaranteed interest. 

With a minimum investment of £25 and a maximum of £50,000, each £1 gets you a unique bond number eligible for monthly cash prize draws. 

Bonds can be purchased by those 16 or older, for themselves or for a child, grandchild, or great-grandchild.¹⁵

Unlike a Junior SIPP, Premium Bonds allow for more immediate access to funds. 

Common Questions

In Conclusion

Choosing the right Junior SIPP provider involves considering costs, investment options, and customer service. 

These plans can come with a mix of fixed or percentage-based fees, as well as diverse portfolios to meet varying risk tolerances. 

Consulting a financial advisor can add another layer of confidence to your investment choices. 

By considering these factors, you should be in a good position to select the best Junior SIPP provider for your child’s long-term financial wellbeing.