Figures from AJ Bell said that, unlike adult pensions and ISAs, where payments typically peak in the run-up to the tax year end, there is a growing trend for contributions to Junior SIPPs and Junior ISAs to be made at Christmas.
AJ Bell confirmed that an annual Christmas gift of a £1,000 subscription to a Sippdeal Junior ISA has the potential to grow to a pot of £26,500 by the time the funds can be accessed on the child’s 18th birthday. If the full current ISA allowance of £3,600 was used each year the Sippdeal Junior ISA could grow to £95,100, comfortably providing for university fees or a substantial deposit on a first home.
Alternatively, if a payment of £1,000 was made to a Sippdeal Junior SIPP for 18 years, and the pot was left untouched from the child’s 18th birthday until the recipient’s 65th birthday the pension could be worth as much as £164,000. If the maximum contribution of £3,600 was paid to the SIPP each year until the 18th birthday then, even with no further payments, the Sippdeal SIPP could be worth as much as £588,000 by the child’s 65th birthday.*
AJ Bell Marketing Director Billy Mackay said “With the Chancellor recently announcing another squeeze on the amount that can be paid into adult pensions we’re expecting the trend of giving a financial gift to a child or grandchild to continue growing in popularity. December has always been the time when Sippdeal has started to see an increase in applications for and payments to Junior SIPPs and we’re expecting a similar trend in this first full calendar year of Junior ISAs.”
Mackay continued, “A payment to a Junior SIPP or Junior ISA is unlikely to be met with the immediate burst of excitement from the child that comes with buying the latest PS Vita or iPhone. However, helping to secure the child’s financial future could be one of the most important gifts you ever arrange.”
*Note - All figures are based on investment growth of 5% within a Sippdeal SIPP or ISA with initial investment management charges of 0.5% and ongoing charges of 1% per annum.