What should I ask before setting up Junior SIPPs for my children?

[GoldenGretchen]

I’ve just inherited the best part of £500k and am looking to invest some of it in a JSIPP for my two children, 8 and 4. Obviously there is an annual contributions limit but I can set some of the money aside for future years. I’ve done plenty of reading but before I go to a financial advisor, what do I need to know?

You have to be comfortable with them getting full control of the money when they turn 18.

I have opted for JISA rather than SIPP as id prefer them to have access to the money when they’re young adults vs in retirement.

We have done JSIPPs for ours. For a relatively small sum of money you can give them a pretty decent pension without them needing to contribute at all.

We set ours up on AJ Bell and manage the investments ourself. I put the money in a global equity tracker because I didn't want to have to keep reallocating the investments.

I’d spread it more over their age/timeline. Mix between retirement savings (J/SIPP) and just enjoying life (ISAs). Don’t lock it all away until they’re in their 50s/60s.

True, although given it's a SIPP, whilst they can manage the investments, it's very difficult to withdraw the money and squander it.

Oops sorry that's me not reading the post properly! Ignore me, I thought the poster was asking about a JISA.

Yeah - your concern about a JISA was a big factor in our decision not to open one for our kids 😬. You never know what kind of 18yo you’re gonna have!

Exactly re irresponsible spending when they reach 18 - we will support them for education and getting set up at that age but I don’t intend to hand a significant sum of money over. I had a small nest egg given to me at that age and can’t even remember what I spent it on. Certainly nothing useful.

It also means that if they are less than brilliant with money then they at least have something as a start for retirement. I learned all this stuff much too late in life so I’m trying to set them up with a more solid financial strategy.

Agreed, plus none of us know how well our kids will earn. I also like the idea that having a decent pension already might allow them to make slightly different choices about jobs / careers which might enhance their happiness.

You won’t need a financial adviser for this, unless of course you want to. There are only a few platforms offering junior sipps that you can manage yourself. I was originally with Hargreaves Lansdown, but I’m now with Bestinvest because personally I like the low contributions (from £50). Hargreaves, AJ bell and Fidelity, the other junior Sipp providers, want larger upfront contributions. Having said that, this sounds like it won’t be so much of an issue for you as you may be putting in the full amount that you can (£2,880 this tax year)

I’d definitely do a mix- I’d max your ISA too, then you can take the money out tax free to help them with stuff as they grow, and you have access to it if you need it. Then think about JISA’s, (£9000 a year limit) then JSIPP as a last resort, it’s locked away for a very long time!

You won’t need a financial advisor for a JSIPP. Just go for one of the low cost providers. Just be aware that some of the online functionality might not be quite as good as it is for the adult versions or even the equivalent junior ISA. It surprised us that we had to do quite a bit of the admin over the phone or by paper for the junior SIPPs we chose but otherwise it’s been very easy and it was quite satisfying seeing the government continuation go in.

Id look at Fidelity for opening your account as they have no fees for junior SIPPs

I opened a JSIPP for my DS with Hargreaves when he was born, and invested the maximum 2.8k until he was 10, and I realised his SIPP was worth almost as much as mine! I self selected for the long term, and chose some blue chip stocks that pay great dividends (Coca Cola etc), expensive US stocks like Amazon, and accumulation funds that reinvest the dividends into more units. It’s going to be a nice little nest egg for DS when he’s older. Unless you really have no clue, you don’t need a financial advisor for this.