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Pensions for children explained

Build for the future with a children's pension

With investment, your capital is at risk. Taxation depends on individual circumstances. Tax rules may change.

Put your child on the right financial path with a pension. Whether it's a Junior SIPP or other scheme, discover the rules and benefits of children's pensions with our guide. 

Saving into a children’s pension is an excellent way to give your little ones a financial boost.

While student loans, buying a home and car finance often take priority, setting up a Junior SIPP or other type of scheme can offer long-lasting benefits. Because of the length of time the money will be invested, even small pension contributions can grow quite substantially.

Read on to explore how pensions for children work, the key rules to bear in mind, and the potential pros and cons.

What is a child pension?

A child pension is exactly what it sounds – a scheme set up on behalf of someone under 18. Parents and guardians make contributions to put their little ones on the right track for a comfortable retirement.

These pensions usually take the form of:

  • Personal or stakeholder schemes, with contributions invested in different funds offered by a provider
  • A Junior SIPP (self-invested personal pension), which offers a wider variety of investment choices and more hands-on control over where the child’s money is allocated

Children’s pensions share many features with those used by adults, including tax relief from the Government. Investment returns are also shielded from capital gains tax and income tax. However, they have a lower annual contribution limit, and your child won’t be able to access their nest egg for many decades.

What are the rules for children's pensions?

You’ll need to keep the following rules and features in mind when opening a junior pension like a SIPP on behalf of your child:

  • Annual contribution limit: You can pay up to £2,880 each financial year into a child pension
  • Tax relief: The Government will contribute another 20% in tax relief, effectively pushing the annual savings limit up to £3,600
  • Eligibility: Only a parent or guardian can open a child pension. However, there’s no minimum age – you can set up a pension for a newborn baby or a teenager. And once the scheme is up and running, any adult can contribute
  • Flexible contributions: You should have the option to make regular or one-off contributions to your child’s pension. This is beneficial when investing lump sums for a child
  • Scheme management: Investment decisions and management of the pension are in the hands of the parent or guardian until the child turns 18. Once they reach that age, control passes to the child
  • Withdrawals: Funds must remain in the pension until the holder reaches 55. This is scheduled to rise to 57 in 2028, so it is something to think about when selecting a savings vehicle for your little ones

Remember, tax rates and reliefs depend on individual circumstances and may change.

What are the pros and cons of a child pension?

It’s always worth weighing up the potential advantages and disadvantages before signing up for a child pension.

Pros of children’s pensions

  • Solid foundations: You can gain some peace of mind about your children’s future when you open a Junior SIPP or other type of pension for them
  • Financial education: Teach your children about the world of investments, long-term saving and retirement planning as they grow up
  • Tax benefits: Tax relief tops up the savings you make. Meanwhile, your child could make a claim for higher-rate relief on future parental pension contributions if they become a higher-rate taxpayer when they’re older
  • Compounding: Even small contributions into a child pension can make a huge difference. This is due to compounding – the snowballing effect of your returns generating more returns. If you pay the maximum of £2,880 in from birth until they reach 18, and the investments achieve annual growth of 5%, the child will have a pension worth more than £700,000 by the time they reach 55*

Potential disadvantages

  • Restricted access: Your child will have to wait many years until they can benefit from your savings
  • Investment uncertainty: There’s no guarantee that your child pension investments will rise. Investments fluctuate so you may get back less than the amount you put in
  • Risk of becoming overstretched: Careful budgeting will help you work out whether you can afford to make regular payments into your child’s pension

Why choose Bestinvest for your children’s pension?

Our multi-award-winning pension – The Best SIPP – is available to children too. Our Child SIPP offers:

  • Easy set-up and management
  • Low fees of as little as 0.2% a year for ready-made portfolios and US shares or 0.4% for other investments
  • A big choice of high-quality investments
  • Support from our award-winning friendly and knowledgeable UK-based telephone team.

Open a Child SIPP with us

Simply download our Child SIPP application form to open an account or call us on 020 7189 9999 for more information.

Frequently asked questions about pensions for children

The annual contribution allowance for a Junior SIPP is the same as for other types of child pension – £2,880. However, once tax relief of 20% is factored in, the annual limit is in effect £3,600. Just remember that tax reliefs and rates can depend on personal circumstances.


You’ll generally need to be 18 before you can set up a personal pension or SIPP for yourself. Parents and guardians can open and manage a child pension for their youngsters, to give them a head-start. However, control is only transferred to the child when they turn 18.

A Junior SIPP is a pension, while a Junior ISA is a tax-free savings account. A parent or guardian contributes to their child’s Junior SIPP and makes investment decisions up to age 18. With Junior ISAs, money is saved in a cash or stocks and shares account, with the child gaining control at 16 and access at 18.


No, only a parent or guardian can usually set up a pension on behalf of a child. However, once a child pension is up and running, any adult is normally allowed to make contributions into it – including grandparents. Just stay aware of the annual contribution allowance, which stands at £2,880.

Yes, money held in a pension can be inherited by your children. There will be no tax payable if you pass away before 75 with a defined contribution pension. However, income tax will be payable at your child’s marginal rate if you die at or after 75.

If you've been thinking about setting some money aside for a little one, our article Investing for children? Here's how you can do it is a useful summary.  



Important information

*This figure is based on an investment return of 5% per annum after fees, compounded annually. It is an example and is not guaranteed. What you will get back depends on how your investment grows and the tax treatment of the investment. Charges may vary. Do not forget that inflation would reduce what you could buy in the future with the amounts shown. This does not constitute personal advice. Please also see the information below.

SIPPs are not suitable for everyone. They may not be right for you if you don’t want to invest across different asset classes or don’t think you will make use of the investment choices available to you. Please contact us for guidance or advice if you are unsure.

The Best SIPP

The Best SIPP

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