What are the ‘rules’ for setting up and paying into Junior SIPPs?

Q: As a current Fidelity investor I'm looking to invest in a Junior SIPP for my 8 year old grandson, how do I do this?

Q: Could I set up a Junior SIPP for a second cousin/cousin-once-removed's child?

Q: How does a grandparent pay into a SIPP for a grandchild. Must they be resident in UK? I'm over 75 so I can’t pay into my SIPP but can I pay onto my granddaughters SIPP?

Q:Can you gift money into an adult child’s pension who is resident abroad?

A: As you can see, we’ve had quite a few questions around Junior SIPPs recently, so we’ve bundled them up here for anyone looking to understand more about them.

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First, what is a Junior SIPP?

A Junior Self-Invested Personal Pension, or Junior SIPP, is a pension opened in a child’s name. The money can be invested and receives the same basic-rate pension tax relief as an adult pension contribution, even though most children do not have an income or pay tax.

The account belongs to the child. A parent or legal guardian looks after it while they are young, and control passes to the child at 18. But - and this is a very important but - control does not mean access. The money remains locked away until the child reaches the minimum pension age, which is currently 55 and rising to 57 from 6 April 2028. As the minimum pension age is set by the government, it could rise again before a young child reaches retirement.

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Here are the headline rules:

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Can a grandparent or other relative open a Junior SIPP?

Not usually. A Junior SIPP has to be opened by the child’s parent or legal guardian.

So, being an existing Fidelity customer doesn’t give you the authority to open one for your grandson, distant cousin and so on yourself. Only a child’s parent or legal guardian can open the account in their name. Once it is open, you can pay into it as a third party - with any tax relief determined by the child's circumstances and pension contribution limits.

The exception would be where a grandparent or other relative has legal parental responsibility for the child. In that case, they may be able to act as the legal guardian and open the account in that capacity.

Who can pay into a Junior SIPP?

Almost anyone can contribute. This could include the child’s parents, grandparents, aunts and uncles, cousins, other relatives or family friends.

The important point is that all the payments count towards the child’s overall pension contributions. It’s not a separate tax-relievable amount for each person paying in. So, if one grandparent pays £1,000 and the parents pay £1,880, the full £2,880 net amount has been used for that tax year.

The parent or guardian managing the Junior SIPP will need to keep track of who is paying what, make sure the contributions remain within the relevant rules and any provider limits and decide how the money is invested. Someone contributing to the pension does not gain ownership of it or control over the investments.

How much can you pay in?

For most children, who have no relevant UK earnings, up to £2,880 can normally be paid into their pension each tax year and qualify for tax relief. The government then adds £720 in basic-rate tax relief, bringing the total gross contribution to £3,600.

Put another way, every £80 contributed becomes £100 in the pension once tax relief is added.

The £3,600 figure is the amount on which a child with no relevant UK earnings can normally receive tax relief - it isn't a separate allowance for every parent, grandparent or other person contributing. Contributions made by third parties are treated for tax-relief purposes as though they were made by the pension member.

There can be a slightly different position for an older child who has relevant UK earnings. A 16 or 17-year-old may be able to receive tax relief on contributions up to the higher of £3,600 gross or 100% of their relevant UK earnings, subject to wider pension rules. For an eight-year-old with no earnings, however, £2,880 paid in and £720 in tax relief is the useful working limit.

How does someone pay into a Fidelity Junior SIPP?

First, the parent or legal guardian opens the Junior SIPP. Once it’s up and running, the relative or friend can make a third-party contribution directly into it - the money does not necessarily have to be gifted to the parent first.

Use Fidelity’s Junior SIPP top-up form to set up a regular Direct Debit, make a third-party contribution or set up eligible regular contributions. Fidelity will ask for details of the person making the payment, along with information about the source of the money. The parent or legal guardian remains responsible for the account and the investment choices.

Does the grandparent need to be UK resident?

It’s the child's eligibility to hold the account and their circumstances that count here; the person making a third-party contribution does not themselves receive the pension tax relief. Depending on where you live, it might be worth checking with the Client Services team before sending a payment from overseas, as the practical payment options may differ depending on the country, bank account and currency involved.

Can somebody over 75 pay into a grandchild’s Junior SIPP?

Yes. The fact that you are over 75 does not stop you making a third-party cash contribution to an eligible grandchild’s Junior SIPP.

You might be thinking about the age-related restrictions for contributions to your own SIPP. You can still make contributions to a registered pension after age 75, but those contributions cannot qualify for pension tax relief.

As you’re paying into a Junior SIPP, the contribution is treated for tax purposes as though it were made by the pension member, so eligibility for tax relief is based on your grandchild's circumstances rather than your age. In this case, the pension member is your grandchild - not you.

The contribution would need to be made using money you hold outside your pension. You can’t simply transfer part of your SIPP into your granddaughter’s SIPP, as pensions cannot normally be transferred from one person to another. If you withdraw money from your own pension first, that withdrawal may have tax consequences, so it is worth thinking about this before acting.

When can the child access the money?

At 18, the child takes control of the pension. They can decide how it is invested, change the investments and make their own contributions.

But their 18th birthday does not unlock the money. A useful way to think about it is that they get the keys to the account - but not the cash.

Under current rules, money in a Junior SIPP cannot normally be withdrawn until age 55. This is due to rise to 57 from 6 April 2028. Given that your grandson is only eight, it is perfectly possible that the minimum pension age will change again before he reaches retirement.

Can you gift money into an adult child’s pension if they live abroad?

You can give cash to an adult child who lives overseas. Whether you can contribute it directly to their UK pension, and whether the contribution will qualify for UK pension tax relief, is a separate question.

A third party can make a contribution to another person's registered pension, subject to the pension provider's rules. For tax purposes, that contribution is treated as though it were made by the pension member, so whether tax relief is available depends on the member's circumstances.

Being non-UK resident doesn’t automatically mean someone cannot qualify. For example, someone who has moved abroad may continue to meet the definition of a 'relevant UK individual' if they were UK resident at some point during the previous five tax years and were also UK resident when they joined the pension scheme. Other exceptions can also apply.

Because residency, pension membership and tax-relief rules can interact, the adult child should check their individual position and the pension provider's rules before any contribution is made. If they have a pension in the country where they live, that country's pension, tax and gifting rules may also need to be considered.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.