Pensions Advice for 19 Year Old

pauln

Hi, I'm keen to get some pensions advice on behalf of my 19 year old daughter.  She has recently dropped out of university as it wasn't for her and has fallen back into doing what was her weekend job on a full time basis for around the national wage.  She doesn't really know where she's going career wise but I'm keen for her to start a pension whilst she works out what she wants to do.  I understand that her employer has to enrol her into a workplace pension when she's 22 but I'm keen that she starts something now rather than wait 3 years (if she stays there that long). 

I've been fortunate enough to have fallen into a public sector pension scheme all my working life so I'm not best placed to offer her advice. 

She won't be investing very much and we'll add a little bit ourselves but I'm keen for the contributions not to be eaten up by fees.  It also needs to be flexible as she may for example decide to go back to university in the future and may not be able to contribute to the pension during her study years.

Many thanks in advance for any help offered.

Flugelhorn

I think I would be tempted just to get her saving at that stage, if she wants to go back to Uni then may need the money to be accessible, not tied up just yet in a pension. 

hugheskevi

pauln said:

Hi, I'm keen to get some pensions advice on behalf of my 19 year old daughter.  She has recently dropped out of university as it wasn't for her and has fallen back into doing what was her weekend job on a full time basis for around the national wage.  She doesn't really know where she's going career wise but I'm keen for her to start a pension whilst she works out what she wants to do.  I understand that her employer has to enrol her into a workplace pension when she's 22 but I'm keen that she starts something now rather than wait 3 years (if she stays there that long). 

She sounds like a non-eligible jobholder, so can request to opt-in. The employer then contributes.

Flugelhorn said:

I think I would be tempted just to get her saving at that stage, if she wants to go back to Uni then may need the money to be accessible, not tied up just yet in a pension. 

I'd agree with this. It may well be sensible to contribute to the employer pension to the extent her own contribution might be matched by the employer, but not beyond that.

Emmia

What's your daughter's plan for a "career"? I'd potentially work on the basis she doesn't return to uni, and would think about other options, like apprenticeships. 

I agree that she would be better off putting money in a savings account for one or two years whilst deciding what to do next

pauln

Thanks everyone.  I was thinking that the pension might be better so she can claim the tax back although I appreciate this would tie the money up until she retires.

Can I claim tax relief if I put money into a pension in her name?

artyboy

pauln said:

Thanks everyone.  I was thinking that the pension might be better so she can claim the tax back although I appreciate this would tie the money up until she retires.

Can I claim tax relief if I put money into a pension in her name?

No - basic rate tax relief will be added directly to the pension and will be tied up until whatever age the government allows her to start withdrawing it in future (currently 57 but likely to rise over the next 38 years she will be waiting to reach that age...)

pauln

artyboy said:

pauln said:

Thanks everyone.  I was thinking that the pension might be better so she can claim the tax back although I appreciate this would tie the money up until she retires.

Can I claim tax relief if I put money into a pension in her name?

No - basic rate tax relief will be added directly to the pension and will be tied up until whatever age the government allows her to start withdrawing it in future (currently 57 but likely to rise over the next 38 years she will be waiting to reach that age...)

Thanks - is that just for her contributions or does basic rate tax relief get added if I contribute money too?  If the former then can I just route the money through her back account so it looks as if they are her contributions?

artyboy

pauln said:

artyboy said:

pauln said:

Thanks everyone.  I was thinking that the pension might be better so she can claim the tax back although I appreciate this would tie the money up until she retires.

Can I claim tax relief if I put money into a pension in her name?

No - basic rate tax relief will be added directly to the pension and will be tied up until whatever age the government allows her to start withdrawing it in future (currently 57 but likely to rise over the next 38 years she will be waiting to reach that age...)

Thanks - is that just for her contributions or does basic rate tax relief get added if I contribute money too?  If the former then can I just route the money through her back account so it looks as if they are her contributions?

It's all treated as her contributions, even if you are gifting it (although she should be the one paying it in) and as long as she has enough relevant income, it will all attract tax relief the same way.

[Deleted User]

If you're keen to give daughter some funds and gain some extra 'relief', I would consider a LISA rather than pension (or a combination of both).
LISA has penalties for early withdrawal (other than for house purchase) but is ultimately available if needed.
A pension is almost certainly locked away for many, many years...

Emmia

[Deleted User] said:

If you're keen to give daughter some funds and gain some extra 'relief', I would consider a LISA rather than pension (or a combination of both).
LISA has penalties for early withdrawal (other than for house purchase) but is ultimately available if needed.
A pension is almost certainly locked away for many, many years...

Or you could pay into a normal ISA for her. 

Albermarle

Have a look at this info for LISA's. 
Lifetime ISA (LISA): how they work & best buys

 If the former then can I just route the money through her back account so it looks as if they are her contributions?

You can, but she can not add more gross than her gross salary. 
So if she earns £10K , she can add max £8K to a pension and £2K in tax relief will be added.

Whether she pays tax, or much she pays is not relevant. The tax relief possible is defined by her gross salary only.