Higher taxes and the growing financial challenges facing younger generations are leading more families to turn to Junior ISAs (JISA) and Junior SIPPs (JSIPP) to help their offspring build financial security.
We’re now less than 12 months out from April 2027, when unused pensions are set to fall into the inheritance tax (IHT) net. Estimates suggest this could double the number of estates paying tax – and IHT takes a big 40% slice after any nil-rate bands and allowances. This could be behind the boom in popularity, prompting families to gift sooner rather than later.
This article is for information only and not personal financial advice. Pension, ISA and tax rules can change, and benefits depend on your circumstances. If you’re not sure what’s right for you, a financial adviser can help.
Giving while living
Gifting during your lifetime can be one of the most effective ways of supporting loved ones, while also shrinking potential IHT liability – as long as you do not compromise your own financial security.
There’s also the added benefit that you get to actually see the impact of your gift.
Contributions from grandparents into a JISA or JSIPP are treated as gifts for IHT purposes, so annual gifting allowances can be used. Gifting anything bigger is treated as a potentially exempt transfer and only falls outside of IHT after seven years.
Beyond tax planning, there’s another powerful benefit – time.
Money invested early inside a JISA or JSIPP has years or even decades to grow free from UK income and capital gains tax through compounding. This is where you can earn returns on past returns, so over time, small and regular gifts can become a life changing financial head start.
Junior ISAs – a stepping stone for young adult milestones
HL JISA openings in the first month of this tax year were up 136% on the same period last year – and have jumped a huge 380% when compared to the same time in 2023/24.
You can invest up to £9,000 each tax year, with all interest and investment growth completely tax-free. Once the account is opened by a parent or legal guardian, anyone can contribute – either regularly or as a one-off.
And starting early can make a big difference. Investing the full £9,000 allowance each year from birth could make a nest egg of around £269,000 by the time your loved one turns 18.
But contributing little and often can also make a meaningful difference. £100 a month – the equivalent of £1,200 a year – could grow to roughly £35,000 by age 18. But your contributions would only be £21,600, so over £13,000 comes from investment growth alone. These calculations assume 5% investment growth, but do not factor in inflation or investment charges.
Try our regular investing calculator and see what your monthly gift could grow to.
The money is locked away in a JISA until the child turns 18 – and it’s this long timeline that gives your gift such huge potential. Some parents might worry about handing over a lump sum at that age, but the data tells a different story.
HL figures shows that young adults don’t rush to splash the cash, 85% of JISAs that matured in tax year 2024/25 still had money invested a year later. Even better, one in four young adults even added more money to the pot – suggesting these accounts can help build positive financial habits, from understanding market ups and downs to the power of a long-term approach.
Junior SIPPs – make your child a pension millionaire
More families are thinking really long term and opening JSIPPs for the children in their lives. JSIPPs though less popular than JISAs are also rising in popularity, with HL account openings up 158% in the first month of tax year 2026/27 compared to last tax year 2025/26 – and 271% higher than tax year 2023/24.
While a JSIPP won’t help them buy their first home – the money is locked away until later life – those early contributions can take the heavy lifting out of retirement planning. Knowing they got a head start and that their SIPP is working hard for their retirement means they’ll have more flexibility as a young adult to deal with competing financial priorities.
Maxing out a JSIPP each year from birth could mean they have a retirement pot of around £100,000 by age 18, giving them a big head start. If they made no further contributions, and the pension continued to achieve 5% annual growth, they’d be a pension millionaire by age 65. And further contributions over their working lives either to the SIPP or a workplace pension would really mean the sky’s the limit.
Like a JISA a JSIPP must be opened by the parent or legal guardian, and control will pass to the young adult at 18. Pension tax relief is available to non-earners, including children, on contributions up to £2,880 each tax year. Thanks to a £720 boost from HMRC it turns into £3,600. And if you need further incentive, just take to look at the maths when compounding works its magic over several decades.
Paying in a regular £100 a month from birth – boosted to £125 with tax relief – could gift an 18-year-old a pension of around £43,650. The cost could be shared equally between parents and grandparents, creating a strong position for them to build on for their future. From here, the young adult maintaining contributions at £100 a month could give them a pension of £738,500 at age 65. These calculations assume 5% investment growth, but do not factor in inflation or investment charges.
Fund ideas for investing for children
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest and make sure any new investment forms part of a diversified portfolio.
Investing can help your money grow, but the value of investments can rise and fall, so you could get back less than you put in. Investing is for the long term, typically 5 years or more.
For more details on each fund and its risks, use the links to their factsheets and key investor information.
Legal & General Future World ESG Tilted and Optimised Developed Index
Global equity funds are a good foundation for an investment portfolio focused on long-term growth. Investing in companies across the globe provides a good level of diversification in a single fund. Legal & General Future World ESG Tilted and Optimised Developed Index provides broad exposure to a range of companies in developed markets, like the US, Japan and Europe, while being mindful of environmental, social and governance (ESG) issues.
This fund aims to track the performance of the Solactive L&G ESG Developed Markets Index. It won’t invest in tobacco companies, pure coal producers, manufacturers of armaments or persistent violators of the UN Global Compact Principles.
An index tracker like this is one of the simplest ways to invest, and could be a good addition to a broader investment portfolio aiming to deliver long-term growth responsibly. The fund engages in securities lending and has a small amount of exposure to smaller companies, both of which add risk.
Schroder Asian Alpha Plus
Asia offers plenty of opportunity for growth. Over the years, rapid industrialisation, growing populations, and a desire to succeed have helped transform countries in the Asia Pacific region.
A young and growing population, along with rising wealth, could be a key driver of growth over the coming years. Continued innovation from companies at the forefront of technology based there could also provide exciting growth opportunities for investors.
However, younger economies mean potentially greater risks and more volatility should be expected. A long investment horizon is essential to help ride out the ups and downs, making the region a great addition to a JISA or JSIPP.
The managers Schroder Asian Alpha Plus look for what they believe are high quality growth prospects in Asia and benefit from the support of a large team of analysts based across the region. The fund could be a good option within the Asian portion of a globally diversified portfolio.
The fund has the option to invest in smaller companies and use derivatives, which can increase risk.
Troy Trojan
Total return funds are more conservative than funds investing fully in company shares. They normally invest in a mix of investments including shares, bonds, commodities and currencies.
They could help provide modest growth for an investment portfolio over the long term and help shelter money when stock markets fall but are unlikely to keep up when they rise quickly.
For parents or guardians worried about the potential for future stock market losses, a fund like Troy Trojan could provide some comfort as part of a diversified portfolio.
It could form the foundation of a broad investment portfolio, has the potential to bring some stability to a more adventurous portfolio, or provide some long-term growth potential to a more conservative portfolio.
The fund has the flexibility to invest in higher-risk smaller companies and while the fund contains a diverse range of investments, it’s concentrated, which is a higher-risk approach.
