Do I bother with Junior SIPPs?

Quidditch

I am hoping that there is an uncomplicated answer to this.

I am a high rate tax payer with my own SIPP. I don’t currently max out my annual allowance. I am looking to invest for my children’s future and came across a Junior SIPP. I am wondering why I would opt for that when I could just pay more into my own SIPP. This means the full 40% tax relief and control over when, how and if I give them the funds.

Can you please share your thoughts. Thanks in advance.

QrizB

Some people prefer to give their children control of their own future, rather than doling out largesse later.

Quidditch

QrizB said:

Some people prefer to give their children control of their own future, rather than doling out largesse later.

But that control comes at the cost of missing out on the extra 20% “free money” that would be available with my own SIPP?

Im struggling to see the purpose of this.

Dazed_and_C0nfused

Quidditch said:

I am hoping that there is an uncomplicated answer to this.

I am a high rate tax payer with my own SIPP. I don’t currently max out my annual allowance. I am looking to invest for my children’s future and came across a Junior SIPP. I am wondering why I would opt for that when I could just pay more into my own SIPP. This means the full 40% tax relief and control over when, how and if I give them the funds.

Can you please share your thoughts. Thanks in advance.

Not everyone wants to be that controlling.

Depending on the age of everyone involved it's possible your children could reach pension age, say 60 for them, and you still be alive for another 20 years after that.

HappyHarry

Junior SIPPs don't really exist, they are just SIPPs with a bit of marketing.

Are they worth setting up for your children or grandchildren? Maybe, it depends on what your objective is. If it is to save tax and hand money out later at your own timing then no, they are not ideal. If your objective is to give them a long-term growth asset that they can retire on and remember your generosity for many years, then they would have a place. 

Like every financial product, they are suitable for some situations and unsuitable for others. We really don't know enough about your circumstances or objectives to determine whether they are an appropriate product for you/them.

QrizB

Quidditch said:

QrizB said:

Some people prefer to give their children control of their own future, rather than doling out largesse later.

But that control comes at the cost of missing out on the extra 20% “free money” that would be available with my own SIPP?

You might die before your wife, leaving your pension to them. They might then re-marry, leaving their pension (and yours) to their new husband or wife.

Or your wife might die first and you re-marry, and your pension pass to your new wife (or husband) who then doesn't pass it on to your kids.

Or you might blow it all on a cocaine-fuelled week in Las Vegas, leaving your kids with nothing.

None of these may seem vary likely, but until the funds are in your kids' hands there's a risk they won't get there.

Also, investment strategies are different. A teenager might want to keep their SIPP in 100% equities for the next 40 years. You probably won't. The difference in returns could easily exceed your tax savings.

Edit to add: FWIW, we didn't bother with Junior SIPPs. We made sporadic payments into CTFs / JISAs. However I've started funding my eldest's SIPP at £2880/£3600pa now they're 18 and at university. I'll do the same for my youngest once they're 18.

Dazed_and_C0nfused

Quidditch said:

QrizB said:

Some people prefer to give their children control of their own future, rather than doling out largesse later.

But that control comes at the cost of missing out on the extra 20% “free money” that would be available with my own SIPP?

Im struggling to see the purpose of this.

Just move on then and stick to what you think is best for you.

They're not compulsory.

dunstonh

I am looking to invest for my children’s future and came across a Junior SIPP.

Remember not to get sucked in by marketing. Virtually all retail pensions are available to under 18s.

I am wondering why I would opt for that when I could just pay more into my own SIPP. 

paying money into your pension is for your benefit.  Paying money into your child's pension is for their benefit.

Its more common, in my experience, for grandparents to make gifts into the grandchildrens pension.  i.e. skip a generation.    Often its party due to gifting and partly due to the idea that the grandchild will benefit from this money long after the grandparent has died and it provides some comfort.

Im struggling to see the purpose of this.

Your objective of being in control is not compatible with the objectives served by setting up a pension for a child.

Just because an option exists, doesn't mean it is suitable for everyone.

Marcon

Quidditch said:

I am hoping that there is an uncomplicated answer to this.

There is. Decide on your objectives and priorities (some useful thoughts in the posts above) and then act accordingly.

leosayer

I set up both a Junior ISA and a SIPP for my son a few years back.

Not huge amounts - around 1 month salary into the SIPP and 2 months into the ISA both invested into a global equity index tracker. 

My goal with the SIPP was to show him the value of investing and compound growth and the benefit of saving for the long haul. It also gives him and existing framework to continue saving into whenever he starts earning.

It has grown 26% already so it's doing the job although he doesn't really pay much attention to it. He's now 18 and hasn't touched the ISA yet.

Albermarle

I am a high rate tax payer with my own SIPP.

Most people are not higher rate taxpayers, in which case the argument for a Junior SIPP changes.

Otherwise you can argue that your child will probably appreciate a leg up when they are in their Twenties, rather than their 60's.