Pension options for newly employed

Ninetails

Hello

DD has just started first job and is now enrolled in a work pension scheme. However, she has capacity to add more but work does not top up so we are after advice pls.

She has a LISA and ISA. She has also opened very low interest account to stash whatever extra she can save but would it be better to open a proper pension account? Where would she start?

dunstonh

but would it be better to open a proper pension account?

Is the amount involved worth creating "another" product?
What is wrong with the workplace pension that would need another product?

kidmugsy

Someone who has just started work probably has more urgent near-term uses for capital than a pension: hence the LISA, no doubt. But if the pension works by salary sacrifice (= "smart pension" = "salary exchange") it might be worth considering. Even then, in her shoes I wouldn't. Better to fill the LISA, put what she can into high interest current accounts and regular savers, and revisit the question if there is a big overhaul of pension tax relief or she becomes a higher rate taxpayer.

It's wise to save for retirement: there's no need to assume that a pension is always the best way to do it.

Ninetails

She's hoping to put aside 1/3 of the monthly salary (£500)

Yes, she has maxed TSB and a couple of 5% regular savers as well as the LISA and ISA.

Maybe just add the extra to the workplace scheme you think?

I am also aware that there is the 25% withdrawal trick but will need to read up on that.

Thank you

xylophone

She has also opened very low interest account to stash whatever extra she can save

How much a month does she propose saving?

xylophone

I am also aware that there is the 25% withdrawal trick

Are you referring to the Pension Commencement Lump Sum?

couple of 5% regular savers

She has Flexdirect/HSBC/M&S/First Direct current accounts?

atush

What dies she want to do with the money?

Ie is she saving for a home, a future family etc?

If you want to use the money befroe age 55, it might be better to save outside a pension.

If she has no immediate plans to buy in th next few years, she should consider a S&S isa for some of the money.

Ninetails

xylophone wrote: »

Are you referring to the Pension Commencement Lump Sum?


She has Flexdirect/HSBC/M&S/First Direct current accounts?

a) If that's the one where everyone was putting in £2800ish and then withdrawing the £750ish then yes

b) Yes, Flexdirect and FD

Ninetails

atush wrote: »

What dies she want to do with the money?

Ie is she saving for a home, a future family etc?

If you want to use the money befroe age 55, it might be better to save outside a pension.

If she has no immediate plans to buy in th next few years, she should consider a S&S isa for some of the money.

Good question. As she is young and still at home, just want her to get into the habit of saving and not splurging (too much)

kidmugsy

Yorkshire Building Society does a two year regular saver for up to £500 per month. Only 2% interest, but at least the money would be available if she finds she wants to buy property, or - for example - needs to buy a car so that she can get to some new job she might get.

xylophone

You indicate that her net salary is £1500 a month and that she has TSB/Nationwide/First Direct current accounts.

She also has a LISA and an ISA.

The LISA/ISA are fully subscribed for this tax year?

She is already saving £550 a month into the NW/FD Regular savers?

In addition to this she wants to save an additional £500 a month?

a) If that's the one where everyone was putting in £2800ish and then withdrawing the £750ish then yes

I am assuming that your daughter is at most in her early twenties - the thread concerning the " 25% withdrawal trick" largely related to those over 55 with no relevant earnings who would contribute £2880, wait for tax relief of £720, take the tax free PCLS and then draw down the balance probably also eventually tax free because it came within their personal tax allowance.

If your daughter wishes to make contributions to a pension over what she is currently contributing then she could do so but if she is hoping to buy a property (or even a car) well before retirement age, then increasing pension contributions would not seem to be a priority?