- You can pay into a Junior SIPP (JSIPP) for a younger member of the family from birth until the age of 18. At 18 it becomes a SIPP and the young person can take control of making contributions for their retirement.
- You can put in up to £2,880 per year into a JSIPP. The tax relief received will gross the contribution up to £3,600. You can make smaller or more ad-hoc contributions too.
- Starting someone’s pension journey early means they have even longer to benefit from compound returns.
- HL data shows someone contributing £300 per month to a SIPP from birth to 18 would have amassed £100,425.95. If no further contributions were made the SIPP would still benefit from investment returns and could be worth as much as £861,835.53 at age 65.
- Someone contributing £100 per month would have accrued a pension pot of £33,475.32 for a young person by the time they hit 18. Again, if they didn’t make any further contributions the pot could be worth £280,530.15 at age 65.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:
“Babies and small children are deluged with gifts – fluffy animals and squeaky plastic toys that are quickly broken or abandoned in favour of playing with the box they came in. A Junior SIPP (JSIPP) may not feel quite as exciting as the latest must-have toy but in terms of a gift with lasting impact you can’t get much better.
There is no better way of seeing the power of pensions than looking at what a JSIPP can deliver over time. If you pay in the full £3,600 per year, then your child hits age 18 over £100,000 ahead of their peers who won’t be auto-enrolled for at least another four years. This sum then has almost 50 years to keep growing and even if they didn’t make a contribution themselves they could still end up with a sizeable pension.
Even if you can’t afford to contribute the whole £3,600 per year for the whole 18 years you can still give them a real head start in life. Contributing £100 per month to their JSIPP would see them accumulate over £33,000 by age 18 and this could be £280,000 by the time they come to retire – it’s a real leg up the retirement planning ladder. Even ad-hoc contributions as and when you can afford them will really build up over time.
Getting to the age of 18 and seeing what they have accumulated can be a powerful incentive for them to really engage with their own financial planning. They’ve been given such a good start they don’t need to worry about finding large contributions of their own – they are able to make smaller contributions to their pension and have more money to save for house deposits or build up savings elsewhere. It’s a gift your child will surely thank you for.”
Estimated pot value at age 18
Monthly contribution (including tax relief) | Value at 18 |
£100 | £33,475.32 |
£200 | £66,950.64 |
£300 | £100,425.95 |
Estimated pension value at age 65 if regular contributions made until age 18 and then stopped.
Monthly contribution including tax relief (until age of 18) | Value at 65 |
£100 | £280,530.15 |
£200 | £567,739.81 |
£300 | £861,835.53 |
Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.