What is best to start saving for a pension for an 18 year old?

Gbiz68

Hi,
My son has just turned 18 and has registered himself as a sole trader to do some contractual work. He, therefore, hasn't got a company pension scheme and probably won't in the near future. He is wondering whether to start signing himself in for a pension independently or should he just start an ISA or any other high interest tax free savings accounts. I'm not very clued up with this so cannot advise him on what to do or what to ask for? Could anybody advice on which company to use if pension is better or any good tax free saving accounts out here?
Thank you 

MallyGirl

It depends on his financial skills but in the early days, with relatively small amounts, then something simple with low fees would work. That might be a robo one like Nutmeg or a more flexible one like a Vanguard SIPP.
He will get the tax relief which will be more than any high interest account could give

Dazed_and_C0nfused

Pension is usually most tax efficient providing he understands the money will be tied up for at least 40 years.

MX5huggy

You/ he should consider Lifetime ISA. https://www.moneysavingexpert.com/savings/lifetime-isas/

There’s a balance to be had he could save in a pension but he will have lots of financial aims before his retirement. 

El_Torro

The priority at the moment may not be a pension, it could be to start saving for a deposit for a property. 

If so then a LISA could be a good idea, as an alternative to a pension. Either a Cash LISA or Stocks & Shares LISA, depending on when he is likely to actually buy a property.

If he does want a pension then there are many providers out there. Hargreaves Lansdown isn't a bad choice: good website and good customer service. They're expensive for large investments but should be OK for at least the first few years.

xylophone

There is no reason why he should not have both a LISA and a pension.

Start early with both and get into good habits!

It's never too soon to learn how to budget and plan.

NedS

xylophone said:

There is no reason why he should not have both a LISA and a pension.

Start early with both and get into good habits!

It's never too soon to learn how to budget and plan.

I agree. He should get into the habit of saving a minimum of 10% into a pension before any other savings / expenditure are taken into account. Any additional savings for a house can then go into a LISA, but don't save into a LISA at the expense of a pension.

Marcon

NedS said:

xylophone said:

There is no reason why he should not have both a LISA and a pension.

Start early with both and get into good habits!

It's never too soon to learn how to budget and plan.

I agree. He should get into the habit of saving a minimum of 10% into a pension before any other savings / expenditure are taken into account. Any additional savings for a house can then go into a LISA, but don't save into a LISA at the expense of a pension.

The sentiment is great, but at 18, he's unlikely to be earning enough to put 10% into a pension, let alone having a LISA as well. Getting into the savings habit is fine, but a teenage boy also wants to have some fun in life - and if he finds he's tied up his hard earned cash for next half century, he may well throw in the towel and stop saving altogether.

Gbiz68 said:

should he just start an ISA or any other high interest tax free savings accounts. 

ISAs are not noted for offering funds with high rates of interest! More info see https://www.moneysavingexpert.com/savings/best-cash-isa/

NedS

Marcon said:

NedS said:

xylophone said:

There is no reason why he should not have both a LISA and a pension.

Start early with both and get into good habits!

It's never too soon to learn how to budget and plan.

I agree. He should get into the habit of saving a minimum of 10% into a pension before any other savings / expenditure are taken into account. Any additional savings for a house can then go into a LISA, but don't save into a LISA at the expense of a pension.

The sentiment is great, but at 18, he's unlikely to be earning enough to put 10% into a pension, let alone having a LISA as well. Getting into the savings habit is fine, but a teenage boy also wants to have some fun in life - and if he finds he's tied up his hard earned cash for next half century, he may well throw in the towel and stop saving altogether.

I get that, but by not/never starting that regular habit of saving, the problem is we can always find an excuse not to save into a pension - there are always other demands on our money at any age. By getting into the habit of saving a small percentage of whatever you earn from the outset, you will hopefully never miss what you have never had.

I never had a pension in my teens because I was young and having fun. I never had a pension in my 20's as I was a student and then only just started my first proper job. I never had a pension in my 30's as I was saving for a house. I never had a pension in my 40's because I had kids and they were expensive. I never had a pension in my 50's as I got made redundant and lost my job. I never bothered with a pension in my 60's as it was too late. There's always a reason.

R_P_W

Being 18 and self employed they will be faced with a number of competing financial priorities over the next few years I'm sure.  There are lots of options and it can be a little overwhelming.  I'm 40 now but when I was 19 my situation was slightly different in that I was employed with a company DC pension.  At 19 I wasn't bothered but a wise colleague of mine encouraged me to put a few % of my income every month into a pension.  That habit stuck with me, it was relatively small £ amounts for those first few years but as my income grew I also upped my contributions.  I wish I had applied the same approach with investments outside of my pension as well, but I'm addressing that now.

So they could set up a SIPP, I have one that I've been transferring older company pension pots into.  I went with Vanguard and its invested in a Global tracker fund.  Like other posters have said the thing with the pension is that the money will be tied up for 40+ years (which is no bad thing since it is for your retirement) 

A LISA or S&S ISA might be a suitable product to have along the pension for the 5-20 year timeframe.

HCIMbtw

When my pension access is at 55 there is just no way i'm contributing to a LISA that locks up until 60. 

I think the rules might have changed on new pension accounts now.. making them 57, but I personally place a lot of value on that earlier access.