How to advise son on workplace pensions?

geemac

My son, 25 yr old, recently started his first full time salaried job in a small company who have said they are not, I believe initially, enrolling the staff in a workplace pension scheme.

Am I correct in thinking that they will have to, but not until 2017?

Should he start saving into his own pension now, or would this have any implications when the company do enrol in a workplace pension?

Thanks

atush

Yes, they will have to eventually but not sure abt the number of employees re when. Perhaps some have til 2018?

anyway, he probably should start his own pension depending on the size of his salary and disposable income. He may have other needs (such as paying off a student overdraft, debt which should be tackled first) such as saving an emergency pot, house deposit etc.

So if he has enough spare income, he should look at paying off debt, emergency pot, pension and other savings- all 4. Any debt over 2% interest should be hit first.

Triumph13

And he should also consider carefully whether a pension or an ISA is the best vehicle for his retirement savings at this point, eg if he is currently a basic rate tax payer, but expects to pay higher rate tax in the future as he moves up the career ladder, then holding his contributions in a ISA for now then using them to fund contributions later with higher rate tax relief would make a lot of sense.

geemac

atush wrote: »

anyway, he probably should start his own pension depending on the size of his salary and disposable income. He may have other needs (such as paying off a student overdraft, debt which should be tackled first) such as saving an emergency pot, house deposit etc.

His only debt is student loan which is being collected at source from salary, I was under the impression this should not be paid off any earlier. Therefore leaving him to invest his disposable income, is this still correct? Anyway I am offsetting his student loan payments from other sources.

xylophone

I can see no harm in his starting a pension now to "get him into the habit" - it might well be possible to transfer it into a workplace pension later?
http://www.cavendishonline.co.uk/pensions/personal-pensions/

He might also wish to start saving into an ISA- presumably he'll be looking to buy a home at some stage?

Has he checked that he has the most suitable current account for his needs?

geemac

Triumph13 wrote: »

And he should also consider carefully whether a pension or an ISA is the best vehicle for his retirement savings at this point, eg if he is currently a basic rate tax payer, but expects to pay higher rate tax in the future as he moves up the career ladder, then holding his contributions in a ISA for now then using them to fund contributions later with higher rate tax relief would make a lot of sense.

Thanks, I was thinking that an ISA was the best option. Do you mean that when he is paying higher rate tax, he would withdraw from the ISA and place in pension fund?

Lokolo

geemac wrote: »

Thanks, I was thinking that an ISA was the best option. Do you mean that when he is paying higher rate tax, he would withdraw from the ISA and place in pension fund?

Can do, but more than likely it would be best to leave ISA where it is but instead of contributing money to that, put it in pension instead, as the tax relief makes it a lot more attractive.

And assuming he had a 1998-2012 loan, its not worth paying it off early at the moment, its 1.5%.

atush

geemac wrote: »

His only debt is student loan which is being collected at source from salary, I was under the impression this should not be paid off any earlier. Therefore leaving him to invest his disposable income, is this still correct? Anyway I am offsetting his student loan payments from other sources.

If he has the old student loans at 1-3% yes, the new ones are over 6%

geemac

xylophone wrote: »

I can see no harm in his starting a pension now to "get him into the habit" - it might well be possible to transfer it into a workplace pension later?

He might also wish to start saving into an ISA- presumably he'll be looking to buy a home at some stage?

Has he checked that he has the most suitable current account for his needs?

Thanks will check out transferring pensions.
He's not thinking about a house yet, more likely to more travelling first!
Think he is happy with current account, there are no fees. Is there anything else to consider?

xylophone

Think he is happy with current account, there are no fees. Is there anything else to consider?

http://www.moneysavingexpert.com/banking/compare-best-bank-accounts
might be worth a look.

dunstonh

Alishabeckett wrote: »

Saving an amount from your salary as a pension plan is definitely a great advice. It is your choice of saving money nothing to do with your office pension plans. If you earn enough to save from it, it is fantastic to avail a pension scheme from the beginning.

For reference, random google translate style quotes form this person (or bot) have appeared on various threads. Just laugh at the bad grammar and ignore them.