Junior SIPP - how it works

BuildTheWall

Thinking of starting a junior SIPP - to take advantage of the long term  compounding and the £700 topup from the govt. Is the topup added automatically like a LISA? Or do we need to file a return or submit any documents?

DavidT67

No, the pension provider makes the claim and adds the amount received into the SIPP in due course.

dunstonh

There is no tax wrapper called Junior SIPP.  That is just a marketing name used by a provider.   Virtually all stakeholder pensions, personal pensions and SIPPs can be set up for minors and work exactly the same way as usual.

 Is the topup added automatically like a LISA?

No.   LISAs have a bonus added to the contribution.   Pensions have tax relief.   That is a deduction on your contribution.   The relief is claimed for you at source by the provider.

Colin_nicol

If a grandparent has two grandchildren, is the max amount they can save into a junior sipp for each one, half of the max £2880?
thanks,
Colin

draiggoch

Colin_nicol said:

If a grandparent has two grandchildren, is the max amount they can save into a junior sipp for each one, half of the max £2880?
thanks,
Colin

It would be £2880 for each child (if they are not earning) as it is based on the child's  income rather than the grandparent. 

xylophone

If a grandparent has two grandchildren, is the max amount they can save into a junior sipp for each one, half of the max £2880?
thanks,
Colin

No - the net £2880 may be contributed to each child's SIPP.

However, the money from Grandma/pa is a gift and there may be IHT implications depending on individual circumstances.

https://www.gov.uk/inheritance-tax/gifts

Colin_nicol

Thanks for those replies.
Colin

Colin_nicol

Is the amount put into a Junior sipp just the same as a straight gift,  in that if you die less than 7 years after the gift there would be liability to IHT on a reducing % depending on how long the donor lived after the gift?

Marcon

Colin_nicol said:

Is the amount put into a Junior sipp just the same as a straight gift,  in that if you die less than 7 years after the gift there would be liability to IHT on a reducing % depending on how long the donor lived after the gift?

It's the same as any other gift. Depends if you've exceeded the gift allowance in the year it was given. See https://www.moneyhelper.org.uk/en/family-and-care/death-and-bereavement/gifts-and-exemptions-from-inheritance-tax

Albermarle

Colin_nicol said:

Is the amount put into a Junior sipp just the same as a straight gift,  in that if you die less than 7 years after the gift there would be liability to IHT on a reducing % depending on how long the donor lived after the gift?

It's a complex area and it seems to depend on the exact situation . In many cases there is no reducing % and if you die less than 7 years after making the gift , then the full amount is taken into account for IHT purposes.

Inheritance tax planning and tax-free gifts - Which?

It might be stating the obvious but this only matters if you are likely to be hit by IHT in the first place of course.
Also anybody can give away up to £3k pa as a gift , with no IHT implications. 

dunstonh

Is the amount put into a Junior sipp just the same as a straight gift,  in that if you die less than 7 years after the gift there would be liability to IHT on a reducing % depending on how long the donor lived after the gift?

Whether it goes in a pension or not is irrelevant to IHT allowances.   A gift is a gift irrespective of what the beneficiary of the gift does with it.        Many people could treat a £2880 gift as coming from income and therefore not use up the gift allowance (which could be used elsewhere).     Although the majority of people in the UK are not going to suffer IHT anyway.