Starting a teenager's pension

OldBeanz

My son, 19, is just about to start a job on £12k pa and will be rolled into NEST over the next few years which will include a contribution from his employer of 3% which he will match.

He is keen to start a personal pension as he realises this will not be enough to allow him to retire in the comfort I now keep him and is thinking of paying £120pcm into a Skandia pension through Cavendish. He is thinking of the Spectrum 8 fund which apart from increasing payments in line with inflation he can forget about for the next 40 years (assuming he retires at 70).

He also has a SL Stakeholder with £5k and was wondering whether he should transfer this as well.

kidmugsy

Saving for his old age may be pretty wise, but why do it in an extra pension? An ISA would offer him far more flexibility, and effectively "freezes" his 20% marginal income tax rate. That is, he pays the 20% tax and then the money sits in the ISA free of income tax and CGT. Money eventually coming out of his pension will be exposed to income tax at whatever rate applies in the future; fifty years in the future by my arithmetic.

xylophone

ISA would offer him far more flexibility,

But if ever he were to require means tested benefits this money would be taken into account regardless of whether or not he regarded it as his pension.

You do not mention saving for a house - is this because he is to benefit from parental/grandparental generosity in this regard?

theEnd

OldBeanz wrote: »

My son, 19, is just about to start a job on £12k pa

At 19 and that salary, wouldn't the money be better spent than saved for the future?

atush

No, the money is not better 'spent' or at least not everything. Saving is something everyone should do regardless of age.

Southend1

I struggled to live off £12k just over 10 years ago. He'll probably need every penny and more for rent, bills, travel etc.

What are his career prospects? Pensions just might not be worthwhile for someone on a low income throughout their career, as every £1 saved will reduce means tested benefits at retirement.

atush

The point is, the 19 yr old is living at home?

OldBeanz

Living at home and is a trainee chef in an international hotel chain so who knows where he will be in 5 years time or whether he will need accommodation. His girlfriend works in the same trade so they may travel or he may go into hotel management as he has an hnd equivalent.
He was complaining about having to work until he was 70 so was told it was up to him at what age he retired and not to rely on the government providing for him.
He is intent in having three piles; short term; long term savings and pension so just wanted to make sure this was a good fund at a good price without too many charges which will meet his at present non interference requirement/

atush

Sounds extremely level headed. I have 2x 19 yr olds at present but they are at Uni still so this hasn't come up yet.

Radiantsoul

You can just pay more into NEST. Probably I would go with the ISA option.

ViolaLass

Does he have emergency savings?