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Planning ahead with a Junior SIPP

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