Junior SIPP - yes or no?

dunstonh

K_S said:

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?

It is an old thread and it's become increasingly harder to get a stakeholder pension.  Robo-providers have largely replaced them.

These options reduce the investment range, and the providers must carry out due diligence on the funds they make available.  Typically that means you get very mainstream investment options.   You should not underestimate the rubbish that exists on social media nowadays that encourages young people to put their money in unregulated rubbish.     Not using a SIPP at the start doesn't prevent them from transferring it later but it may just be a sufficient hassle to put them off.

K_S

Thanks both, that's really useful and some food for thought to mull over.

MX5huggy

Murphy_The_Cat said:

Both of my sprogs have SIPP's that I contribute to and I'm very happy to do it for them.

It'll give them a hell of a good start on the pension front, plus every £100 that goes into their pensions (before the Government tops it up by 25%) is £100 less that HMRC will take 40% in IHT when I pop my clogs.

But money in your own SIPP would passed on to your children (or whoever) outside your estate so free of IHT, maybe you are up to the AA or LTA on your own SIPP.

Albermarle

Murphy_The_Cat said:

MX5huggy said:

Murphy_The_Cat said:

Both of my sprogs have SIPP's that I contribute to and I'm very happy to do it for them.

It'll give them a hell of a good start on the pension front, plus every £100 that goes into their pensions (before the Government tops it up by 25%) is £100 less that HMRC will take 40% in IHT when I pop my clogs.

But money in your own SIPP would passed on to your children (or whoever) outside your estate so free of IHT, maybe you are up to the AA or LTA on your own SIPP.

That's if there is anything left in my SIPP when I croak !

If you have IHT issues, best to leave the SIPP intact and use other savings/assets to live on, if possible.

cloud_dog

K_S said:

Thanks both, that's really useful and some food for thought to mull over.

A pension for ours was bottom of the finance pile, but we did open one whilst they were still a minor / we had the control to open one (around 16/17).  The primary purpose of doing this was simply to know that a pension for them was in existence (we knew the details etc) and monies could be directed there if required.  We only contribute the minimum (£25pm), and is there simply as a 'covering all bases' approach rather than anything else.
 

Zolablue

MX5huggy said:

Murphy_The_Cat said:

Both of my sprogs have SIPP's that I contribute to and I'm very happy to do it for them.

It'll give them a hell of a good start on the pension front, plus every £100 that goes into their pensions (before the Government tops it up by 25%) is £100 less that HMRC will take 40% in IHT when I pop my clogs.

But money in your own SIPP would passed on to your children (or whoever) outside your estate so free of IHT, maybe you are up to the AA or LTA on your own SIPP.

Isn't that just if you die before you are 75?

MX5huggy

Zolablue said:

MX5huggy said:

Murphy_The_Cat said:

Both of my sprogs have SIPP's that I contribute to and I'm very happy to do it for them.

It'll give them a hell of a good start on the pension front, plus every £100 that goes into their pensions (before the Government tops it up by 25%) is £100 less that HMRC will take 40% in IHT when I pop my clogs.

But money in your own SIPP would passed on to your children (or whoever) outside your estate so free of IHT, maybe you are up to the AA or LTA on your own SIPP.

Isn't that just if you die before you are 75?

@Zolablue No, IHT is not due either side of 75 the benefactor is due to pay income tax on any money they take from the pension if post 75. So they should not take large pots in one go. https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/pensions-after-death

UrbanAchiever

I opened SIPPs for our kids 2 years ago and put the max in each year for each of them.  They are 13 and 14. I will do this for another 2 years.

I like the 20% top up they get from HMRC.  I also like the fact that compounding will have a dramatic effect on their SIPPs over the next 50+ years.  This should mean when they need to spend on other things in their early adult lives such as buying a house and raising a family, it will take some pressure of them to pay loads into their pensions.

I constantly talk about finance with them and they understand the benefits of long term investing and low cost index trackers.

However I haven't done the SIPPs at the expense of other investments.  They each inherited a small amount of money a couple of years ago.  That cash is invested in Berkshire Hathway shares within an ISA. And instead of pocket money I pay £50 each month into an ISA for each of them.  This invests in an S&P500 index tracker.  As soon as they are old enough they will open LISAs if they are still available then.  

I think its important to have a range of different investments in different tax shelters to meet their needs at every stage of their lives.

None of this will "transform" their lives.  They both need to learn the value of money and the need to work hard to earn it.  But it will give them a bit of help when they need it and it's a great way to get them involved and give them a good financial education.

Dazed_and_C0nfused

I like the 20% top up they get from HMRC

It's 20% tax relief.  Which equates to a 25% "top up" of the amount you pay in 😊

UrbanAchiever

Yes of course, 25% top up!  Even better!