How a £2,880 Yearly Contribution Can Grow to £1.2m

A Junior Self-Invested Personal Pension (SIPP) allows parents or grandparents to start a retirement pot for a child from birth. Unlike a Junior ISA, which is often the default choice for school fees or a first car, the SIPP is designed for the very long term — money cannot be accessed until at least the age of 57 (rising to 58 in 2028 and likely higher later). Yet for families looking ahead, the arithmetic is compelling.

The maximum contribution for a non-earning child is £3,600 a year. Because the government adds basic-rate tax relief, the actual amount you need to pay in is just £2,880. According to analysis from Hargreaves Lansdown, if the full £3,600 (gross) is invested annually until age 18, the pot could reach around £105,000 — and, if left untouched, could compound to approximately £1.2 million by the time the child turns 68, even with no further contributions.

Beyond the headline numbers, the Junior SIPP is increasingly being used as an estate-planning tool. Contributions generally fall outside the donor’s estate for inheritance tax (IHT) purposes after seven years, and the whole pension sits outside the child’s own estate. With upcoming changes to the IHT regime, Hargreaves Lansdown recorded an 82 per cent increase in Junior SIPP openings during 2025, suggesting that grandparents in particular are waking up to the dual benefit of building a nest egg while passing on wealth tax-efficiently.

Why Inheritance Tax Changes Are Fueling Junior SIPP Demand

The Estate Planning Appeal of Junior SIPPs

The surge in openings coincides with a shift in inheritance tax policy that is making intergenerational gifting more urgent for many families. While the precise shape of the new rules remains uncertain, the direction of travel is toward a tighter system, making pension wrappers — which already enjoy significant IHT advantages — even more attractive. Because a Junior SIPP is an irrevocable gift into a trust-like structure, it can reduce the donor’s taxable estate while creating a ring-fenced asset for a grandchild.

How Junior SIPPs Stack Up Against Junior ISAs

The Junior ISA (JISA) remains far more popular, largely because the money can be withdrawn at 18 for university costs, a house deposit or a car. But that very flexibility costs the child decades of compound growth. A JISA also forms part of the child’s estate once they turn 18, whereas a SIPP stays outside. For grandparents who want to reduce their IHT liability and are comfortable locking the money away, the SIPP is a sharper instrument. The trade-off is liquidity: a SIPP ties up funds for half a century, so it works best as a supplement to, not a replacement for, a JISA.

The Provider Landscape

Hargreaves Lansdown’s data reflects a broader trend, but the market for junior SIPPs is still small and fragmented. A handful of platforms offer them, often with higher percentage-based fees than their adult equivalents because pots start at tiny balances. Investors should compare charges carefully; a 0.45% platform fee on a £10,000 pot is manageable, but on £500 it can eat up a large share of returns if the provider does not cap fees for children’s accounts.

How to Set Up a Junior SIPP: Steps, Caps and Pitfalls

  • Contribute up to the £3,600 ceiling if you can. The government tops up every £2,880 net payment to £3,600, but only within that annual limit; unused allowance cannot be carried forward.
  • Choose a platform that waives or caps fees for small pots. Standard percentage charges can crush returns in the early years. Look for providers that explicitly offer a low-fee junior account.
  • Use it as part of your estate planning. Because pension contributions are generally exempt from inheritance tax after seven years and the SIPP sits outside the child’s estate, it can be a more tax-efficient gift than cash or a direct investment.
  • Do not lock away money you may need for education. A Junior SIPP cannot be accessed until at least age 57. If the goal is to help with university costs, a Junior ISA — or a separate savings account — remains the appropriate vehicle.
  • Start early to harness compound growth. The Hargreaves Lansdown projections assume an age-18 pot of £105,000; delaying the first contribution by even a few years significantly reduces the final sum because time is the engine of the SIPP.