The SIPP or Self-Invested Personal Pension is an incredibly useful vehicle for building wealth and obtaining financial freedom.
The key advantage is control. A SIPP allows contributions to be invested across shares, funds, investment trusts, and bonds, with generous tax relief boosting long-term returns.
Unlike many workplace schemes, it offers flexibility over asset allocation and drawdown strategy. Used consistently over decades, and combined with compounding, a SIPP can turn steady monthly savings into a substantial retirement income.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Investing for a child
Like with many things, starting early can be key. Many people reading this will be in their 30s, 40s, 50s, or 60s, and thinking about opening a SIPP for themselves to make retirement that bit easier, or come sooner.
However, if there’s a young member of the family coming into the world, it may also be worthwhile considering opening a SIPP for them. The reason, of course, is compounding.
A SIPP opened at birth has roughly 60 years to compound. For example, £2,000 added today could reach £620,000 in 60 years even if nobody ever added another penny. That’s assuming 9.6% annualised growth — that’s the average performance of a Stocks and Shares ISA over the past decade.
Obviously £620,000 won’t have the same buying power then as it does now. But it’s still an incredibly powerful contribution to their later life.
Naturally, the child can contribute to it at any time during their working life. The goal, simply, would be to give them a head start.
Where to invest?
When investing for a long period, especially with a relatively small starting figure, and probably a passive stance, a few diversified investments would likely be favourites.
One option is Scottish Mortgage Investment Trust (LSE:SMT). It’s one of the UK’s most popular investment trusts and it invests predominately in technology companies.
The portfolio is deliberately concentrated and long term in nature, with major holdings including Space Exploration Technologies, MercadoLibre, TSMC, Amazon, Nvidia, and ASML.
This gives investors exposure to themes such as artificial intelligence, semiconductor manufacturing, global e-commerce, and even private space exploration.
Performance has been volatile but strong over the long term.
As at 31 October 2025, the share price was up 35.7% over one year and almost 387% over 10 years, comfortably ahead of its benchmark over the same period.
Net asset value growth has been similarly impressive across longer time frames, reflecting the managers’ willingness to back disruptive businesses early.
However, this is not a low-risk option. The trust uses gearing (borrowed money to invest), which can amplify gains but also magnify losses during market downturns. Its heavy exposure to growth and technology shares also makes returns sensitive to changes in interest rates and investor sentiment.
For that reason, Scottish Mortgage is usually better suited to investors with a long time horizon who can tolerate significant ups and downs along the way. And for that reason, it’s definitely worth considering.
