Pension planning for a student

Mabel22

my granddaughter has asked me if it is a good idea to start a personal pension at age 20. Is it? Or should she save in an ISAS until she is in full-time employment?

Dunnit

Depends who is paying into the pension

Radiantsoul

Mabel22 wrote: »

my granddaughter has asked me if it is a good idea to start a personal pension at age 20. Is it? Or should she save in an ISAS until she is in full-time employment?

Normally people recommend saving an emergency fund first off and clearing any debts(except perhaps student loans and mortgages) before getting a pension.
The point of pensions and savings is to smooth consumption over your lifetime, and as most students are quite poor I am not sure it necessarily makes much sense.

dunstonh

Also depends on the objectives of the investor. If it is saving towards retirement then the pension is a very effective way of doing that. If it is saving towards a house in 5 years tie then a pension is useless.

Mabel22

thanks for quick responses. She has no debts apart from her student loan (and she has saved some of that!). She intends putting a small amount of money away each month. Would she be better taking up a regular saving deal, or paying into a starter pension..? She has seen the result of debt within the family!

atush

If she keeps some cash for emergencies, then saving into a S&S isa might suit. Can give her long term growth w/o tying it up til age 58.

I would imagine at some point she will want to buy a house.

As for a pension, should her parents open one for her and pay in, that would be a good idea.