Important: Childhood pensions
The value of investments and the income from them can fall as well as rise and investors may not get back the full amount invested. Past performance is not a guide to the future and investments do not have a capital or return guarantee. Any investment decisions should be made after receiving professional advice. Pension and tax rules apply and it is important to remember the rules can change.
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A childhood pension – also known as a Junior SIPP – is a tax-efficient way to save for your child’s retirement.
Similar to adult pensions, children’s pensions attract a 20% government contribution – even with no taxable income. This benefit is unique compared to other savings options like ISAs.
Help your children secure a brighter financial future by harnessing the power of childhood pensions and compound interest. In this video, Wealth Management Consultant Matt O’Hara explains how starting early can significantly boost your child’s retirement fund.
We all want to do the best we can for our children, and this doesn’t stop when they turn 18. By opening and investing in a childhood pension when they’re young, you’re helping your children prepare for their retirement. There is no longer the need to wait until employment to start retirement planning.
At Mattioli Woods, we have developed our SIPP and SSAS pensions to be multi-member arrangements, allowing your children to consolidate or build their own retirement fund. Your consultant can even talk through potentially reducing fees based on your children’s share of the overall pension scheme.
Furthermore, all our clients are provided with a dedicated consultant and client relationship manager, meaning your children will benefit from a bespoke consultancy-led approach too.
If you are new to Mattioli Woods, book an initial FREE consultation to see how we can help you and your children’s finances.
Childhood pensions can be opened by parents and guardians of a child; however, deposits can be made by others, e.g. other family members.
As with all pensions, the funds will only be available at retirement. This is currently age 55, rising to age 57 in April 2028, however, this could be higher by the time your child reaches . If you want your child to receive the funds earlier, you should consider a Junior Individual Savings Account (JISA), which you can either open instead of or alongside a childhood pension.
As most children are not yet in employment, there is an annual allowance of £2,880 for the 2024/25 tax year. Add the Government’s 20% tax relief and there could potentially be an allowance of £3,600 per year.
Yes! Any growth generated within the pension will not be subject to either capital gains tax (CGT) or income tax. However, the pension will still be subject to income tax at retirement. The 20% tax relief is another tax advantage. While most of the pension will be subject to income tax when they draw it, they should still have the 25% tax-free lump sum to take at age 57 (or older). This is subject to Government changes between now and your child reaching retirement.
Yes, as you are effectively ‘gifting’ your payments, they will be covered in the tax-free gifting allowance – currently £3,000 – therefore reducing the size of your estate. However, this can be a difficult area to navigate, so you should discuss this with your financial adviser.
Another yes. Thanks to the way compounding works, even those smaller contributions can build up over time. By saving earlier and often, you could see a greater impact than larger contributions later on.
Because any money generated within the pension is reinvested, there is a possibility this too can generate growth. Therefore, the earlier you start investing, the bigger the opportunity for compounding – or interest on your interest!
A childhood pension automatically converts into an adult pension when the child turns 18. This can either be left where it is or moved to a different provider.
