Junior SIPP - yes or no?

DrHyde

Good morning,
I understand the rational headline arguments for Junior SIPPs (tax free saving, high compounding effect, a safety cushion for the children, etc) but am still in 2 minds as to whether this is right for my 4 year old twins.
Reasons are that...
a) for reasons not necessary to explain I think this country (unlike Austria and Germany) is headed the wrong way and I think there's a 40% chance we will move out of the UK in the next 10-15 years. To then have such a product adds complexity in new tax regimes I'd assume. I'd rather the children would not need to deal with this.
b) We would contribute only small amounts into junior the SIPPs - eg, £100 pm. I'm thinking that my wife and I (both 39) could as well just start saving £100 pm more in our own SIPPs - no risks of hitting lifetime or annual lifetime allowance, same tax benefits - eg in a fund that we say will be for the children and commit to not to touch for ourselves. From the point we crystallise our own pensions, we could start thinking about how to pass the accumulated wealth on. Chances are that by then there will have been some changes to pension legislation anyway - hence difficult to plan now in either case.
I'd welcome the forum's thoughts.
Would you given the circumstances start saving in Junior SIPPs or your own; or something entirely different?
Best wishes, DrH

mcooke999

In short, No.
There are far better ways to save for your children's future such as within your own ISA or using a JISA depending on whether or not you want to be in control of when they receive the money.

Notepad_Phil

It's been a while since I was putting money aside for my children, but unless there was an extremely compelling reason I personally would never put any significant sums in their own names as I wanted the flexibility to pass over the money when I felt it suitable to do so, so everything was kept in mine and my wife's names but in dedicated funds so that I was completely aware of the sums set aside.

I'll also do this once any grandchildren come along most probably making use of the £20k ISAs that are currently allowed for both of us, ensuring that people are aware of what my intentions are and keeping an updated will so that it is clear what is what should I not be around.

If I did ever consider putting money into their own names then I think a pension would be the last thing I'd consider. I personally would rather that they'd have use of the money in the earlier part of their lives, rather than when they get to early retirement ages, which could even be in the 60's by then.

dunstonh

I understand the rational headline arguments for Junior SIPPs (tax free saving, high compounding effect, a safety cushion for the children, etc) but am still in 2 minds as to whether this is right for my 4 year old twins.

Just on a technical point, there is no such thing as a Junior SIPP. That is just marketing by a particular company.  Virtually all stakeholder pensions, personal pensions and SIPPs are available for children.

Would you given the circumstances start saving in Junior SIPPs or your own; or something entirely different?

Personally, I wouldn't normally use a SIPP for minors.  I tend to use stakeholder pensions.  This avoids the 18 year old getting their hands on a SIPP with all sorts of advanced investment options and blowing it with bad decisions.

I tend to find it is grandparents that more often contribute to pensions as there is something that appeals about passing wealth on that way.   The thought that in 60 odd years time, the grandchild will benefit from this and remember the grandparent that did it.

Parents use the pension allowance for children much less.   

Albermarle

Just on a technical point, there is no such thing as a Junior SIPP. That is just marketing by a particular company. 

Now two companies  - https://www.fidelity.co.uk/junior-sipp/

Dox

Stakeholder pension. Start one and put a small amount in each month, quarter, year or whatever.

dunstonh

Some companies would call them chocolate if they thought they would sell more

AnotherJoe

Nope,  unless you have maxxed out all other savings vehicles for them*, which given you are looking at a relatively small amount, i venture to guess the answer is "no".

So, why not?

1) Hugely inflexible.

2) Sad but true, not everyone makes it to 60 or thereabouts.

3) Frustration throughout many life events from childhood to young adult life,  school trips, university, career training, house purchase etc, that they cant use the money. Money that may mean they could have been able to earn much more or otherwise be in a better position to contribute much more to a pension than your modest amount.

4) There are many other ways to invest, in their name, or in your name, that mean there's much more scope to control its use and use it for thinsg that act as a platform to a better life.

Now, you could say (4) is true when you invest in your own pension, but at least thats a choice you make for yourself, rather than one that someone decided for you before you were an adult.

*FWIW that is ML's position as well

DrHyde

That's all very helpful. Thank you everyone! 👍

K_S

dunstonh said:

Would you given the circumstances start saving in Junior SIPPs or your own; or something entirely different?

Personally, I wouldn't normally use a SIPP for minors.  I tend to use stakeholder pensions.  This avoids the 18 year old getting their hands on a SIPP with all sorts of advanced investment options and blowing it with bad decisions.

@dunstonh Sorry to resurrect an old thread.

We're considering opening SIPPs for our daughters and I was curious about what you said above (in bold), I never thought of that angle where an 18 year old might sell off a world tracker and put it all on a crypto ETF or something speculative like that.

What's different about a stakeholder pension that stops/reduces that possibility? Is it simply a smaller choice of funds?

Albermarle

What's different about a stakeholder pension that stops/reduces that possibility? Is it simply a smaller choice of funds?

Yes a smaller choice of funds and all mainstream ones.

You could get similar with a robo advisor, just maybe a choice of three to ten funds.

Or something simple like this.

Personal Pension | Private Pension | Legal & General (legalandgeneral.com)

Nor sure if they accept under 18's but it is a good example.