Junior ISAs versus Junior SIPPs: the basics

Helping your child build a financial security blanket isn’t just a thoughtful gift - it can set them up for life. Whether you're aiming to support them through university, their first home, or even their retirement (yes, really), the two popular long-term savings options that many investors turn to are a Junior ISA (Individual Savings Account) and a Junior SIPP (Self-Invested Personal Pension).

The good news is that Fidelity doesn’t charge service fees on our tax-efficient Junior ISA and Junior SIPP. But other charges will still apply, depending on which investments you choose. 

What is a Junior ISA?

A Junior ISA is a tax-free savings or investment account for children. Think of it as a super charged piggy bank that you don’t pay any tax on if it earns any money while it’s sat inside.  

You can open one if you're a parent or guardian, and other people (like grandparents, aunts and uncles, godparents and friends) can contribute. And the annual limit is £9,000, meaning you can save or invest up to that amount each year.

Until your child turns 18 the money is locked in. On their 18th birthday it becomes a regular ISA and the child takes control of it. At that point, only they can pay into it.  They’re free to take the money out or keep investing it. 

• Read about five things your teen should know about their ISA

Types of Junior ISA 

There are two types of Junior ISA. A Cash Junior ISA, which earns interest like a savings account. And a Stocks and Shares Junior ISA, which invests the money in the stock market, with potential for more growth (but also more risk). 

• Learn how maxing out a Junior ISA can turn into a £243,561 nest egg

What is a Junior SIPP?

A Junior SIPP is a long-term pension account for children. It’s all about setting them up for much later in life - their retirement. 

Like a Junior ISA, anyone can pay into a Junior SIPP.  

You can contribute up to £2,880 a year, and the government will top it up with 20% tax relief, making it £3,600 total. The child gets full control at 18, but they can’t access the money until at least age 55 (this rises to 57 from 2028). 

Like other pensions, up to 25% of the pot can eventually be taken tax-free. 

The money can be invested in funds, shares, bonds, or cash, and grows tax-free over the years. Because of the long-time horizon, even modest contributions can grow into something meaningful over time. It really is a case of the sooner the better.  

• Learn about the benefits of starting to invest early

At a glance - the key differences between a Junior ISA and Junior SIPP

Which one should you choose? 

It’s not up for us to say what’s right for you - it really depends on what you want for your child... now and in the future. 

If you want to help your child with things like university, travel, or buying a first home at age 18, the Junior ISA is a flexible and popular option. 

If you’re thinking even further ahead - to give them a strong head start on retirement savings - then the Junior SIPP might be worth considering. Especially since the government tops up any contributions you make up to the allowance by 20%. 

You don’t necessarily have to pick one or the other. If you can afford it, you could even do both, so that you’ve got both their early adult years and future retirement covered. 

Both Junior ISAs and Junior SIPPs are about building good financial habits and giving your child a real head start. Whether the money is for a first car or their future retirement, what matters most is the intention - and the act - of starting early.

• Open a Junior ISA  
• Open a Junior SIPP 
• Learn more about the benefits of investing early
• Read: Can I transfer my ISAs to my grandchildren to encourage them to save?

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. Junior ISAs are long term tax-efficient savings accounts for children. Withdrawals will not be possible until the child reaches age 18. A Junior ISA is only available to children under the age of 18 who are resident in the UK.  It is not possible to hold both a Junior ISA and a Child Trust Fund (CTF).  If your child was born between 1 September 2002 and 2 January 2011 the Government would have automatically opened a CTF on your child’s behalf.  If your child holds a CTF they can transfer the investment into a Junior ISA.  Please note that Fidelity does not allow for CTF transfers into a Junior ISA.  Parents or guardians can open the Junior ISA and manage the account but the money belongs to the child and the investment is locked away until the child reaches 18 years old. 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.