Pension contribs for non earning students

Flugelhorn

Looking to set up pensions for 2 currently non earning students (my kids) , put in the £2880 each and get the higher rate tax relief.

I am not particularly interested in trying to handle all the investments etc as I would probably get it wrong, so would be looking at some sort of plan. Is this still called a SIPP (which seem to focus on deciding on own investments) or should I be looking at stakeholder pensions?

MK62

Flugelhorn wrote: »

Looking to set up pensions for 2 currently non earning students (my kids) , put in the £2880 each and get the higher rate tax relief.

I am not particularly interested in trying to handle all the investments etc as I would probably get it wrong, so would be looking at some sort of plan. Is this still called a SIPP (which seem to focus on deciding on own investments) or should I be looking at stakeholder pensions?

You won't get higher rate relief......each of your kids will get basic rate relief.

As to the selection of investments, a SIPP is a Self Invested Personal Pension, so you would need to select an investment to place the money in........the same is true with a stakeholder pension - the choice is more restricted but there is a default fund the money goes in if you don't select one yourself.
Selecting a fund isn't all that difficult though - and you need to weigh up the overall charges of any plan you are considering.

Flugelhorn

MK62 wrote: »

You won't get higher rate relief......each of your kids will get basic rate relief.

.

Bother! Where did I get that idea from ? so only higher rate if into own pension? :rotfl:



Thanks for info - so case of looking at the investments on offer with companies, doing some research etc

MK62

Flugelhorn wrote: »

Thanks for info - so case of looking at the investments on offer with companies, doing some research etc

If it's pensions for students, then you are probably looking at between 35 and 70 years as the investment timeframe - no guarantee of course, but over such long periods, equities have usually given the best returns overall, so personally I'd probably be looking at a Global Equity Fund, probably a passive tracker type fund, which you simply have a check on now and again (once a year for instance), and on a low cost platform (which probably means a percentage fee platform, at least in the early years).

Also, have you considered LISAs?
For the sums in question, they come with similar tax benefits, and can be used to fund house deposits for first time buyers in the future - or can be used for tax-free retirement income post 60 (by which time the SIPP access age will probably have risen to at least 57-58 too).
The choice of provider is more restricted though, but at least two of the mainstream investment platforms do them (Hargreaves Lansdown and AJBell......there may well be others too)

Marcon

Flugelhorn wrote: »

Bother! Where did I get that idea from ? so only higher rate if into own pension? :rotfl:

Correct - you get only get higher rate tax relief if the payment is made by you into your own pension (and you're a HR taxpayer!).

Where did you get the idea? From one of the many poorly written/wrong articles which regularly appear in the media.

Flugelhorn

Many thanks will have a look at those.
Good thought re LISA though, may be more fleixible
Personally have a DB pension which essentially required little brain effort from (equally had little control) so clearly need to get stuck into some research.

Flugelhorn

Marcon wrote: »

Correct - you get only get higher rate tax relief if the payment is made by you into your own pension (and you're a HR taxpayer!).

Where did you get the idea? From one of the many poorly written/wrong articles which regularly appear in the media.

Actually I have just found the paperwork from a retirement seminar set up by my accountants :rotfl: - what they actually said was that pensioners could pay into kid's pension and it would get the basic rate but if the kid's happened to be HR payers then they could get the HR relief as well (even though they hadn't paid the money themselves). Clearly I was doing some wishful thinking about a bit more tax relief