16 yr old and pensions

june1970_2

My 16yr old son has decided he wants to start a pension but i do not have a clue where to start.

He was going to go to his bank but i was told this might not be the best idea.

Could anyone give me any tips??

dunstonh

He was going to go to his bank but i was told this might not be the best idea.

Nearly all the banks operate salesforces who are not allowed to recommend investment funds. As the pension is the ultimate long term savings plan, where it gets invested is the single most important thing. The amounts involved may not seem much to worry about but he is going to have 50 years of investment. Thats a lot of potential for growth.

cheggers

Your son needs to go with a stakeholder pension, he needs to aim to pay in 10% of his wages if he can, I think minimum contributions are £20 a month. By start at a young age will help him in later life.

Go with Standard Life or Norwich Union. I'd avoid the banks as they are not experts in pensions.

Your son needs to contact an IFA or he could go direct through a discount brokers perhaps Cavendish online or that firm in Brisol (might be henderson's)

dunstonh

Your son needs to go with a stakeholder pension

Or personal pension or ISA depending on a few factors.

Go with Standard Life or Norwich Union

Why these two?

Not saying you are wrong, just interested. For example, the NU personal pension is a far better product than their stakeholder.

Paul_Varjak

cheggers wrote:

Your son needs to contact an IFA or he could go direct through a discount brokers perhaps Cavendish online or that firm in Brisol (might be henderson's)

Do you mean HARGREAVES LANDSDOWN in Bristol?

june1970_2

thank you very much for your replies, i will have a look over the weekend to see what we can find out.

dadrock

Dont forget that "free" IFAs are also salesman and will often sell you the package they get the best commission deal on. To get truly "independent" advice you will need to pay an IFA who does not make on commission.

As your son is 16 he can afford to spend a few months researching the options. As well as listening to our "bloke in the pub" opinions here, I would also spend some time reading articles on https://www.motleyfool.co.uk as well.

My tuppence worth would be to sit on my 16yr old hands and wait until my career was moving and see what company schemes are on offer. Mostly, they are much better then personal pensions. In the meantime stick away a regular amount into the best savings plan I could find. A lot of pension plans take their charges up front (front loading) to give to the IFA Salesman. Your son would be paying these before he gets to save anything.

That'll do for starters!

dunstonh

Dont forget that "free" IFAs are also salesman and will often sell you the package they get the best commission deal on. To get truly "independent" advice you will need to pay an IFA who does not make on commission.

Free IFAs are those paid for by the affinity group or employer (i.e. somoene else is footing the bill) or someone doing it on a "real" free basis as a hardship case or similar. Apart from those rare cases, there is no such thing as a Free IFA and no IFA can market themselves as such unless they truely are free. (rule change from July last year ensured that cannot happen).

Although commission bias is possible, recent research has shown it not be an issue with IFAs. Probably as the providers generally pay out similar amounts anyway and in these days where people are more interested in seeing the research behind a recommendation, it would be harder to bias with commission anyway.

A lot of pension plans take their charges up front (front loading) to give to the IFA Salesman.

Name one stakeholder that does that? You would also be hard pushed to name a personal pension that does that too on the likely premium a 16 year old would be paying.

Assuming it was a larger contribution, you also shouldn't rule out any plans that do have upfront charging. A number of these are cheaper than stakeholders over the term and the assumption that the IFA will make more on these is incorrect. Scot Life, Scot Eq, Skandia are just 3 examples of PPPs that can have an upfront charge but result in lower charges over the term than a stakeholder pension.

Remember what the advisor gets paid is not always directly related to the charges you will pay. Especially on pensions.

june1970_2

dadrock wrote:

Dont forget that "free" IFAs are also salesman and will often sell you the package they get the best commission deal on. To get truly "independent" advice you will need to pay an IFA who does not make on commission.

As your son is 16 he can afford to spend a few months researching the options. As well as listening to our "bloke in the pub" opinions here, I would also spend some time reading articles on https://www.motleyfool.co.uk as well.

My tuppence worth would be to sit on my 16yr old hands and wait until my career was moving and see what company schemes are on offer. Mostly, they are much better then personal pensions. In the meantime stick away a regular amount into the best savings plan I could find. A lot of pension plans take their charges up front (front loading) to give to the IFA Salesman. Your son would be paying these before he gets to save anything.

That'll do for starters!

Thank you, i have said to him to open a savings account and pay some of his wages in each month while he is at college as he is going to try and get in the army and i know they have a good pension scheme.