First job…what’s recommended

allystar

Hi there, my daughter will start her first job in a month, with a salary of around £25k.

She will turn 18 around the same time…while Zi’m aware she’d need to opt in to the Company scheme (which matches up to 10%) I’m not sure d what the right advice is at that age.

Hubby says get her to put 5% in, employer matches…

My thought would be this and get her to take an ISA.

Any advice??

Emmia

The earlier she starts saving for a pension, the better. But she should also put money into other savings like an ISA - if the intention is to leave it for 10+ years, a S&S ISA should give a better return. But if she'll (potentially) want access sooner she could go for a cash ISA. 

I probably wouldn't go for a LISA in this situation (yet) as that ties money up until used for a property purchase or retirement - but the government bonus would be "lost" (that's the price of flexibility)

Is your daughter planning to go to uni? Or is the intention to carry on working through to retirement?

JoeCrystal

That is actually very generous for a DC pension scheme. I would match it to the max if I can afford to. It would give her the habit and beside if she work for a public sector or a company with DB pension, she may be able to transfer in the funds.

Grumpy_chap

allystar said:

Hi there, my daughter will start her first job in a month, with a salary of around £25k.

She will turn 18 around the same time…while Zi’m aware she’d need to opt in to the Company scheme (which matches up to 10%) I’m not sure d what the right advice is at that age.

Hubby says get her to put 5% in, employer matches…

My thought would be this and get her to take an ISA.

Any advice??

Her future self will be grateful if she pays the maximum she can into the pension - at least sufficient to secure the maximum employer contribution.
She might be constrained by NNW rules.

Robin9

How much is she to give you for her Bed and Board ?

As above the earlier she saved for pension/property purchase the better but she needs to enjoy life / holiday etc

Dazed_and_C0nfused

Robin9 said:

How much is she to give you for her Bed and Board ?

As above the earlier she saved for pension/property purchase the better but she needs to enjoy life / holiday etc

The op is referring to his own daughter, not a lodger!

JoeCrystal

Dazed_and_C0nfused said:

Robin9 said:

How much is she to give you for her Bed and Board ?

As above the earlier she saved for pension/property purchase the better but she needs to enjoy life / holiday etc

The op is referring to his own daughter, not a lodger!

It is a fair question! Contributing to the cost. I think you mean her rather than his. 🙂

Dazed_and_C0nfused

JoeCrystal said:

Dazed_and_C0nfused said:

Robin9 said:

How much is she to give you for her Bed and Board ?

As above the earlier she saved for pension/property purchase the better but she needs to enjoy life / holiday etc

The op is referring to his own daughter, not a lodger!

It is a fair question! Contributing to the cost. I think you mean her rather than his. 🙂

Oops, yes, her daughter.

Just don't really get the whole your own children paying bed & board, rent, keep whatever people choose to call it.

hugheskevi

This is a case of managing the efficiency to liquidity trade-off. Efficiency is great in the long-term to build up large asset bases by taking advantage of incentives on offer from Govt through the tax system and from employers, but it usually involves tying up money. Whereas liquidity gives access to immediate cash, but without any of the benefits available in other vehicles.

In this case, the most efficient way to take advantage of the incentives on offer would be 10% of gross salary into the employer pension (if that is the maximum that is matched) and £4,000 from net salary into a LISA.

But that needs to fit into wider financial planning, and things like building a precautionary savings fund. Working through this financial tool would be a useful exercise (each box is clickable for more information). 

The biggest risk at this stage is that your daughter may be in a stage of life where she has minimal outgoings and so is very well-placed to save, but gets into the habit of spending all or most of her income, much of it on frivolous things. Or even worse, now she has an income and can get credit cards, etc, builds up debt with no assets to show for it. 

Although her income will rise in the future, so will her expenses, so getting into good habits now and understanding the wider financial position would put her in a far better position for the future. A key point is that you don't miss what you don't have, so getting into good habits early is a lot easier than reducing spending to save more after a period of higher spending.

But she is young, and life is there to be lived, so the key is balancing taking advantage of the best incentives, avoiding the pitfalls of spending and debt, and spending an appropriate amount to enjoy life.

ButterCheese

In my experience it's a good idea to budget for what your future living expenses might be, and pay into the pension on that basis.  once it is set up, it becomes easier to manage.  mentally you can write-off the pension as a necessity rather like a tax or a student loan.  It's very easy for youngsters to start earning a wage and think they're flush if they have minimal outgoings, thus being ill-prepared for their future i.e pension.  

On the subject of paying rent, that's a different issue and not one the OP has asked about.  it's entirely up to them

BlackKnightMonty

Let’s be realistic. £25k is the NMW. If your daughter can save and contribute to a pension from that then she is doing brilliantly well. But with the COL she may find it hard to do so; and projecting unrealistic expectations that she should save a third of her salary need moderating.