When planning for a child’s financial future, parents typically consider Junior ISAs or even saving within their own adult ISAs. However, another intriguing, albeit much longer-term, option exists: setting up a pension for your child.
While it might seem incredibly early to think about retirement for a toddler, the power of compound growth over many decades makes this an option worth exploring for some UK families.
Understanding a Child’s Pension
Technically, you’d be setting up a Junior SIPP (Self-Invested Personal Pension) for a child. Contributions benefit from basic rate tax relief, even if the child has no earnings, effectively topping up your contribution by 20%. These funds are then invested and grow free from UK income tax and capital gains tax, just like an adult pension.
Just like an adult’s pension, the money is locked away until retirement, typically until they reach normal minimum pension age, which could be at age 57, or even later, depending on future legislation.
Why you might consider setting up a Junior SIPP.
One of the most compelling advantages is the immense benefit of Time and Compound Growth. Money invested early has decades to grow, potentially accumulating a substantial sum by retirement. Furthermore, the immediate Tax Relief on contributions is a significant boost, making every pound you put in worth more from the outset.
It instils a valuable sense of Long-Term Financial Security, knowing a portion of their retirement is already taken care of, and it provides a truly Ring-Fenced Retirement Pot that cannot be accessed for other purposes.
Why a child’s pension may not tick all the boxes.
The primary drawback is the Lack of Accessibility. The funds are locked away for potentially 50+ years, meaning they cannot be used for critical life events like university fees, a house deposit, or starting a business – goals that JISAs are often used for.
There is also Uncertainty Over Future Rules; pension legislation can change significantly over such long timescales, impacting contribution limits, access ages, and tax treatment.
A child’s pension isn’t for everyone, especially if you have more immediate financial goals for them. However, for those looking to maximise the power of time and provide an incredible head start on retirement savings, a Junior SIPP offers unique tax advantages and long-term growth potential. Does the appeal of such long-term benefits outweigh the lack of flexibility for your family?
Published on: 19/09/2025
Contact: Daniel Sperber at Coleshill Wealth Management
T: 01675 622 445 | daniel@coleshillwealthmanagement.co.uk
The information contained in the blog is for information purposes only and does not constitute advice. Please seek financial advice prior to making any decisions.