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Guide to children's pensions (Junior SIPPs) and investing for their future

Many of us consider pensions to be exclusively for working-age adults, but that’s not always the case. Children’s pensions are also available and can enable parents, grandparents, guardians, and relatives to secure the long-term future of the next generation. In this article, as part of our wealth management service, we explore how a child’s pension works, the pros and cons for you as a contributor, and how much it could be worth in the future.

Updated: 17.07.26

By Austin Seales

This content was factually correct when written but may not reflect current developments or information.

Children's pensions

What is a children’s pension (Junior SIPP)

A child’s pension is also known as a Junior SIPP (self-invested personal pension). A Junior SIPP can be opened at any time by a parent or legal guardian from the day a child is born up until they’re 18. Once the account has been opened, anyone can contribute to it.

When your child turns 18, they will be able to take control of their Junior SIPP, which will automatically convert to a standard SIPP product. Crucially, though, your child won’t be able to access these funds until they reach retirement age. Currently, this is 55 years old, but it will increase to 57 years in April 2028.

How much can you pay into a child’s pension?

As a child has no relevant UK earnings, you can pay up to £2,880 into a children’s pension in any given financial year. The government tax relief of 20% (equal to £720 if contributing the maximum £2,880) tops this up to £3,600, the maximum non-working people can contribute to their pension.

If the child were to start working at 16, in order to get tax relief, the combined pension contribution allowance would be the higher of 100% of their total earnings or £3,600. For example, if the child was contributing to a workplace pension and a parent was contributing to a child’s pension in their name, the total contributions across both could not exceed the higher of 100% of their total earnings or £3,600.

Can grandparents contribute to a child’s pension?

Yes, although the pension can only be opened by a parent or legal guardian, anyone can make contributions to a child’s pension, and for grandparents, it can be an effective strategy for inheritance tax planning.

Anyone can gift up to £3,000 each tax year without it being added to the value of their estate (this is known as your annual exemption). If the full £3,000 isn’t gifted within the year, you can carry over the remaining balance, but only into the following tax year. For example, if a grandparent gifts £2,000 in one tax year, they can gift £4,000 in the next tax year (their annual £3,000 exemption plus the £1,000 carried over).

Individuals can also gift up to £250 per person as many times as they like within each tax year. But this allowance cannot be used on someone who has already benefitted from another gift allowance. For example:

  • A grandparent has five grandchildren.

  • The eldest grandchild is learning to drive. The grandparent gifts £2,000 to the grandchild to pay for driving lessons.

  • At Christmas, the grandparent decides to use their £250 small gift allowance as presents for their grandchildren.

  • However, as the eldest grandchild has already benefitted from a previous gift allowance (the annual exemption), the grandparent cannot also give them their £250 small gift allowance.

*Bear in mind that anything gifted over £3,000 in one year (excluding the £250 gift allowance) would be included in your estate for inheritance tax purposes if you were to die within seven years of the gift.

Is a Junior SIPP or a Junior ISA (JISA) better?

Both enable you to save on behalf of a child, but each has its own rules about how the money is accessed and tax liabilities. While one isn’t better than the other, the right option for your family will depend on your own circumstances and goals.

The main difference is that a Junior ISA becomes accessible when your child reaches 18. So, while it’s a tax-free way to save for your child, they take complete control over the account when they reach adulthood, and you have no control over how they use the money. Fundamentally, a Junior ISA is a long-term savings account, whereas a Junior SIPP is a pension product which is accessible when the child reaches retirement age.

Here’s a summary of how each one compares to the other:

Feature

Junior SIPP (child’s pension)

Junior ISA (JISA)

Aim

Retirement savings.

General savings or gift when child reaches 18.

Annual limit

£2,880 (topped up to £3,600 through tax relief).

£9,000

Tax implications

Benefits from 20% tax relief at source. Subject to current pension rules (25% tax free on withdrawal, 75% is subject to income tax).

No tax on the amount or withdrawals.

When can money be withdrawn?

Currently 55 years, increasing to 57 in 2028.

18 years old

The power of compound growth

Compound growth is interest earned on interest. Over time, it can accumulate considerably.

For example, if you set up your child’s pension when they’re born, by the time they’re 18 years old, that could equate to £96,016 based on paying in the maximum every year, plus tax relief and compound returns of 4% each year. By the time they reach 65, the total amount in the fund could be worth more than £600,000. This again includes compound returns and assumes a fund that grows an average of 4% each year.

Remember that most pension funds are held in investments that can go down as well as up, so returns are not guaranteed. Also bear in mind that the value of the pension pot would be adjusted depending on the level of inflation at the time your child reaches retirement age.

FAQs

Managing wealth to strengthen your children’s financial future

Few of us like to think about what might happen to our assets when we pass away, but wealth management and estate planning can be hugely beneficial to those we leave behind. For parents and grandparents, contributing to a child’s pension can be included as part of this and be an effective way to reduce the size of your estate and, in turn, lower inheritance tax, while contributing to the child’s future.

Whether a children’s pension is right for your family will depend on your own circumstances, but it’s important to look at your assets and financial situation from a long-term perspective. To do this, you can speak to a qualified independent financial advisor (IFA) at Alan Boswell Group.

Our tailored approach to wealth management and intergenerational wealth planning means we’ll assess your current position and guide you through options to help you meet your financial goals. For more information about how we can help, speak to a member of the team on 01603 967967.

The value of investments and any income from them can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future. The value of tax benefits depends on your individual circumstances. Tax laws can change.

Need help with a pension

To do this, you can speak to a qualified independent financial advisor (IFA) at Alan Boswell Group. Our tailored approach to wealth management means we’ll assess your current position, and give you suitable options that enable you to meet your financial goals. For more information about how we can help, speak to a member of the team on 01603 967967.  

 

Speak to us:  01603 967967

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