Case Study: Planning ahead with a Junior SIPP

Liz and Roger are both high earners working in banking. They want to invest tax efficiently for themselves and their children so have already contributed the maximum allowable to ISAs, Junior ISAs and their own pensions.

They decide to open a Junior SIPP for their baby daughter Florence. They pay £2,880 each year until she reaches age 18; in total they pay £51,840. The contributions grow at an average of 4% a year which means the fund is worth c.£96,000 when Florence turns 18. The fund continues to grow at an average of 4% a year until Florence is 57 and can access her pension fund.

The fund is now worth £443,000. Florence draws 25% of the fund as an immediate tax free payment which gives her £110,750 to pay off her mortgage. The rest of the fund remains invested to provide Florence with income when she eventually retires

Facebooktwittergoogle_pluslinkedinmailFacebooktwittergoogle_pluslinkedinmail