I want to help my son with his Pension

Pugliese

Some suggestions please as I am not up to date with current pensions.

My son aged 25 and still living at home has been contributing £300pm towards our rent and housekeeping from his income that is at basic rate tax and probably will be for some time.

Having just built our new home and moved in, I have managed to clear our mortgage, so having moved we no longer have rent to pay and I was thinking that we would drop his housekeeping contribution to £100pm allowing him to invest the balance each month.

He does have an ISA from last year but that was only on my suggestion and whilst he is good a budgeting he is not good at keeping his eye on the best accounts etc.

I have read on here that perhaps the best thing to have is a mix of pension and ISA's but the regular contribution of a pension would probably suit him better. However he is aiming to buy his own place eventually so on the other hand I am thinking he wants to keep any investment accessible at the moment, so Pension may not be best.

Any suggestions???

JoeCrystal

Well, does his employer have a pension scheme he can join? If so, does they contribute money into it.

Well, to be frank, he needs to do both. Save up for his own place AND pension scheme. With regular contributions to pension, he will already be used to doing it. If he just sticks with saving up for a house, then when he buy his house, he will have other money concern like other stuffs to buy and so on. Before he know it, he would be in his forties and would make no attempts toward saving into a pension scheme!

Cheers,
Joe

dunstonh

I have read on here that perhaps the best thing to have is a mix of pension and ISA's but the regular contribution of a pension would probably suit him better.

S&S ISA can be tempting to access whenever they want for those that lack the self discipline. Pension makes sure it is for retirement.

However he is aiming to buy his own place eventually so on the other hand I am thinking he wants to keep any investment accessible at the moment, so Pension may not be best.

Like most people, you never have one goal in life. He has to plan for retirement and he wants to plan to buy a house. If you go 100% in to one then the rest suffer. Whilst saving for deposit is an easy excuse for someone to make, it can followed up by more equally easy excuses. Such as the early years of being in the house are the most expensive as you kit it out, decorate etc. Then you have wedding. Children take many years of expenditure away from you. Then you want to buy another house and start that cycle again. Then when the mortgage is paid, the children gone, you find you only have a short time left and it would cost you a fortune each month to catch up.

He needs to treat retirement planning like a household bill. get used to paying it before he buys the house so its not so much of a hit later.

At 25, he is already a late starter. By no means terminal but a rough guide is that every 5 years of delay requires you to pay in double each month what you would have needed had you started 5 years earlier. A 20 year old can get away with £50pm net. A 25 year old £100pm net, A 30 year old £200pm net etc. (caveat - only a guide. all figures assume indexation and averages applying with no early than state retirement. Those earning more will need to pay more to maintain lifestyle. Those used to a frugal lifestyle, may need less).

atush

I think it is great you want to ehlp him, but he does need to tand on his feet too. 100 a month is low ( I charge my son just over 200). It costs more than 100 for his food and electicity/water. He will need to afford much more than this later.

So, help him get a pension. Ask him about his employer, and what they have. Once he has done that and put in as much as he needs to to get the max employers contribs he need to start other savings Cash to fund 3 months expenses (preusmably the cash isa he has now), and then cash for a deposit (if he thinks he will buy soon) and S&S ISA for later.

He should be able to save loads if you are only charging him100-200. Unless he is wasting all the money he doesn't have to spend on rents, bills and food on going out, holidays, clothes, girls etc. If he is, you need to get him to get his lifestyle in check and to save more each month.

dunstonh

I paid £60pm to my parents and that was over 20 years ago. You are being generous.

System

Is he your only child? If he is going to inherit your house one day he doesn't need to bother saving for his own, he just needs to hang around and wait.

kidmugsy

1) for eventually buying a house he should probably look at regular saver accounts.
https://forums.moneysavingexpert.com/discussion/608697

2) for pensions, given that he pays basic rate tax, he should pay in enough to maximise his employer's contribution but probably no more at the moment. He could always save in a Stocks and Shares ISA now, with the prospect of contributing capital to a pension if he becomes a higher rate tax payer, or gets the advantage of a salary sacrifice scheme, or becomes a member of an employer's scheme with a potentially higher contribution rate.

Pugliese

Thank you for the helpful replies and I have thanked where appropriate.

The bad news is that his employers do not have a pension scheme at present. The good news is that he does not have to worry too much about saving for a deposit as unknown to him, within the next 12m a family trust will pay him in excess of £100k, so the emphasis does need to be on pension but I do like DunstonH's suggestion that he starts to get used to saving for all the different demands there will be on him during his life.

So until his employers have to set up a pension scheme, is he better off just concentrating on S&S + ISA's or should he set up his own pension?

Pugliese

Clifford_Pope wrote: »

Is he your only child? If he is going to inherit your house one day he doesn't need to bother saving for his own, he just needs to hang around and wait.

This initially made me smile but of course it is actually IMO a very sensible suggestion and addresses a lot of issues including housing shortages, break up of family units etc etc.

Alas he has a younger brother, but we are lucky enough to have the solution - a second house - mind you it is in Italy, so there could be some squabbling!

Pugliese

dunstonh wrote: »

I paid £60pm to my parents and that was over 20 years ago. You are being generous.

Yes, £100 does seem low but he does buy and cook at least one meal a week, but I take the point and maybe £150 would be nearer the mark. Mind you I have built our new house as a Passive House and anticipate a saving of 80% on our energy bills - now that is Money saving!

BristolBob

Pugliese wrote: »

Yes, £100 does seem low but he does buy and cook at least one meal a week, but I take the point and maybe £150 would be nearer the mark. Mind you I have built our new house as a Passive House and anticipate a saving of 80% on our energy bills - now that is Money saving!

Why not keep it at 300 pcm and put the excess somewhere safe for him and give him a nice surprise when he moves out?