Pension thoughts for 25 year old

cdbhel

Hi, hope someone can help. My son is 25 and graduated a year ago. He currently earns good money but is planning to start at PhD during the next academic year. I am very concerned that he does not have any kind of pension provision but he does have some savings. He currently pays the maximum £200 / month into a Help to Buy ISA in preparation for using that at some point in the future. Should he wait until the Lifetime ISA comes in next year and pay as much as he can into that too towards a pension or should he try to take out a private one now as well? If so, how do we go about ensuring he gets the best deal with a provider? Going forward I am not sure how much he will be able to put in each month as his PhD is for 3 years but the idea of him having made no pension provision by the time he finishes that at 28 worries me although I am sure he would not be alone. Any thoughts please? Many thanks in advance for any assistance. I am just a worried Mum!!!

xylophone

If he is currently earning, does his employer not provide a pension scheme?

Even at 28, his working life is likely to extend to another forty years so he'll have time to build a pension with an employer's contribution.

He can use the Lifetime ISA when it becomes available.

Even if he will be a non earner for the next few tax years, he could choose to contribute £2880 to a personal pension and receive tax relief of £720 -
if he chooses self employment after further study, the plan would be there ready for his contributions.

cdbhel

Thanks for the reply - he is self-employed currently so there is no company contribution at all. So I guess you are saying that if he opens a personal pension now and just pays in what he can he can try and keep that going whilst doing his PhD and then add to it later if he can. I doubt he will have much money to spare over the next 3 years but could just pay a minimum and then do a Lifetime ISA too when they start. We need to consider which pension provider to go, that is a minefield too.....! Thanks again.

edinburgher

Have you spoken to him about your concerns? My parents were never very switched on with financial discussions, he would probably be glad to know that you're worried on his behalf!

xylophone

He might like to consider a SIPP with Hargreaves Lansdown whose administration is excellent and charges reasonable for a modest sum.

I have a young relation (under 30) for whom a basic child pension was set up - he transferred it and a DC pension to an HL SIPP - he now has a DB scheme but still contributes regularly to the SIPP - this will be even more beneficial when his salary tips him into higher rate.

Your son might like to read

http://monevator.com/category/investing/passive-investing-investing/

as a start.

kidmugsy

Its conceivable that the best thing you could do for him financially is to persuade him not to do a PhD. But it's all unknowable.

jamesd

Still too young for unhelped pension contributions. ISA to get a home will be more beneficial. If he was getting employer contribution matching it would be useful to just enough to get that. Since it isn't available, it'll wait and he can prioritise home buying for now.

cdbhel

Yes, I have and he shares my concerns to a point but more about not being able to get on the property ladder!

edinburgher

cdbhel wrote: »

Yes, I have and he shares my concerns to a point but more about not being able to get on the property ladder!

There is more to life than owning a house! I rented from 17-29, wish that I still did in a lot of ways. My wife and I used to have no problems finding nice big flats for £400-500 in our city, now we pay £800+ for a mortgage and double the Council Tax!

jamesd

Well, if you're paying twice the council tax you're probably in a higher value place than before, so that doesn't really look like a fair comparison. Rent is more like interest only with added service plan (landlord repairs) so that's not so comparable to repayment either.

Getting in to the cheapest possible purchased place can save a lot of money. Challenge is sometimes not to buy biggest but cheapest to set things up to save lots of money to use to upgrade later.

I'm now at almost 11 years of no rent increases in the place I'm living in while owning another one so I'm definitely happy with renting. But I'll save more than £5,000 a year when I can finally move.

edinburgher

jamesd wrote: »

Well, if you're paying twice the council tax you're probably in a higher value place than before, so that doesn't really look like a fair comparison. Rent is more like interest only with added service plan (landlord repairs) so that's not so comparable to repayment either.

Indeed, I have to pay for the repairs with the house as well, so it's even worse, comfortably over £1,000 a month! You can barely swing a cat in at least 1/2 the rooms in our house, I definitely didn't go for the biggest we could find :rotfl: