Junior SIPPs and ISAs

[daverobev]

What are people's feelings/actions on these? Tax shelter availability is just so generous in the UK, I'm not going to be able to max these out for my children for any length of time.

My feeling is to fill the JSIPP for a couple of years with 100% stocks (either 100% VWRL.L for simplicity, or *maybe* VUSA.L + VEUR.L + VFEM.L for lower fees) and then forget about it, but add a couple of k a year to JISAs ongoing - possibly 100% LifeStrategy 80.

The thinking being the JSIPP will grow enough over the next 60+ years (holy shit... I just checked, 7k over 63 years at 6% growth = 275,000. Ah actually I should've done 53 years, and that even at 5% is still over 90,000. But who knows what the unlock rules and retirement ages will be in 50 years.

Then the JISA is house deposit/university/whatever.

[PhilB]

Depends how late you have your kids.  We had ours late, so it made much more sense to put the money in our own pensions as we will have access to them before our kids are of an age we'd want them to access the money.  We'll start recycling the money from our pensions to their LISAs once they turn 18.

[frugledoc]

Depends how late you have your kids.  We had ours late, so it made much more sense to put the money in our own pensions as we will have access to them before our kids are of an age we'd want them to access the money.  We'll start recycling the money from our pensions to their LISAs once they turn 18.

That’s our thinking as well.  I’m 40 but target retirement age 50 - 55 and have 2 kids under 5.

If I hit my target before retirement age I’ll start on their tax sheltered accounts then

[sea_saw]

Not having any kids myself I haven't looked into this particularly hard, I just want to add that /r/ukpersonalfinance has a bunch of horror stories from people who at 18 got a letter telling them they now have access to £x and who then spent it all on rubbish they later regretted. Hopefully children growing up in an MMM household with lots of financial literacy and skills would know better, but if you have a specific plan in mind like a house deposit, I'd bear in mind that it may be safer in your hands than theirs.

Whether the tax advantages outweigh that risk I don't know, presumably it depends on what your alternatives are, whether you're using up your personal ISA allowance etc.

Sometimes I wonder if there should be such a thing as a junior LISA!

[daverobev]

Not having any kids myself I haven't looked into this particularly hard, I just want to add that /r/ukpersonalfinance has a bunch of horror stories from people who at 18 got a letter telling them they now have access to £x and who then spent it all on rubbish they later regretted. Hopefully children growing up in an MMM household with lots of financial literacy and skills would know better, but if you have a specific plan in mind like a house deposit, I'd bear in mind that it may be safer in your hands than theirs.

Whether the tax advantages outweigh that risk I don't know, presumably it depends on what your alternatives are, whether you're using up your personal ISA allowance etc.

Sometimes I wonder if there should be such a thing as a junior LISA!

That is perhaps the baby bond stuff? Not sure.

We were doing similar things in Canada - RESP and in trust for accounts, but it's true the RESP remains in control of the 'subscriber'. The in trust for becomes the child's money when they come of age but I don't think anyone sends them anything to notify them!

The nice thing about the JSIPP is that you can't get it til (state pension - 10 years) age. If you haven't become sensible by then (and let's be fair, they would quite likely already have had an inheritance from me by that point), oh well.

The JISA. Yeah, well, I'll have to risk it. I'm going to be shovelling cash into my ISA and SIPP as fast as I can, but this extra I already consider 'their money'. I don't want it on 'my books' if that makes sense.

JISA is for university or house deposit or whatever (early retirement jumpstart!); when they are 18 it is up to them though yes of course I'll be talking them through it well in advance.

[vand]

I've made the first contributions into my 17 month old daughter's JSIPP and JISA this week. As others have already pointed out, the annual compounding will roll into an almightly snowball given how many years she has ahead of her, God willing.

ISA will hopefully fund her university education, but I will greatly encourage her to nurture it as her main lifetime investment fund and grow it to a sizeable fortune.

Keeping it very simple for now and going with Vanguard's All-World tracker.

Small acorns...

[vand]

It might be a trivial point, but I'm wondering how do people classify JISA/JSIPP contributions when calculating their personal savings rate? As savings/investment or expenditure?

I'm not really comfortable with either... so I just reducing my gross income figure down by the amount contributed.

[londonstache]

That's along the lines of our thinking too - 100% VWRL for baby londonstache, who will arrive fairly soon. We're in the fortunate position where we think we can make full JISA contributions in addition to filling our own ISA allowance each.

Also thinking about a JSIPP but that's a stretch too far at the moment (largely as we may not stop at baby 1, so want to be able to treat others equally), but could be a way of throwing in money from grandparents or if we have additional cashflow.

[shelivesthedream]

We have a JISA for TodderSLTD and have yet to put any money in it personally, but all monetary gifts to him have gone in there. As a child of parents, I wouldn't be that keen on a JSIPP - it doesn't give you the money when you actually need it. Extra cash in your twenties is a huge boost. Extra cash in your sixties? Hopefully you've sorted yourself out by then! I presume your thinking is that you're saving them from having to save, but that's not enormously helpful in your first few jobs compared to actually having an injection of cash into your life for fees/house deposit/whatever.

[londonstache]

That's true, I'm just thinking of the growth over a 60 year period...

[shelivesthedream]

If they leave it in the JISA, which they may (I largely did) the growth will be the same.

[never give up]

By then access age will probably be 105. So if you just fill one years worth of allowance now that's probably their entire 'old age' retirement funded :-)

[vand]

The usual SIPP vs ISA pro/cons apply just as well to the J- versions.

The more thought I give it the more I'm of the view that they should be seen as complimentary rather than competing products, so I am in favour of doing both. I know that seems like a cop-out position, but the perceived advantages or drawbacks of either wrapper can just as easily be spun on its head and turned into the opposite argument depending on your view and an individual's personal situtation. We are very lucky to have both these options available to us in the UK, it  seems to border on cognitive dissonance if you know about them but choose not to take advantage of them.