Pension for a young person

Stilernin2

I intend to open a private pension for my granddaughter for her 18th. Is there an advantage to waiting until she is 18 or if I open it is it easily transferrable?

She will be going to university so this initial lump sum is just to start her off and make it simple to add to when she has an income.

Can you recommend any providers that will make this a simple thing for her going forward?
Many thanks.

El_Torro

If you really want to keep things simple for her I would go for a platform that offers a personal pension rather than a SIPP. Something like L&G or Scottish Widows will probably fit the bill.

Before any money goes into her pension it's worth remembering that she's going to be buying a car, buying a property, potentially having kids, etc… long before she's retired. It may be worth having the money more accessible than waiting 40 years to access it.

Also, when she turns 18 it won't be possible for anyone but her to add to her pension. That means you (or whoever) will have to give her the money and she will add it to her pension herself. If you open a junior pension before she's 18 then her parents can add to the pension on her behalf.

kermchem

How much do you intend to give her per year?

There are several low fee options, Dodl?

NoMore

Also, when she turns 18 it won't be possible for anyone but her to add to her pension. That means you (or whoever) will have to give her the money and she will add it to her pension herself. If you open a junior pension before she's 18 then her parents can add to the pension on her behalf.

Thats not true, your applying ISA contribution rules to Pensions. See berlow link

Third party pension contributions | Techzone | Aberdeen

Granted, not every pension provider may faciltate this, but it's not specifically against the pension legislation like you have stated.

dunstonh

I intend to open a private pension for my granddaughter for her 18th.

You won't be able to open one up for your granddaughter. Under 18, it has to be opened by the parent or guardian. Once at 18, only your granddaughter can open it.

Once open, future payments can come in from family members with most providers but some may require it to come from your granddaughter (so you pay into her bank account, and she pays into the pension).

Can you recommend any providers that will make this a simple thing for her going forward?

Most providers will handle this transaction fine.

Isthisforreal99

Personally I would look at alternatives such as a LISA (or the new help to buy ISA from 2029). Reason being is you are tying that cash up for at least 40 years, probably more.

I think she would benefit more from something that could be used as a house deposit.

Marcon

https://forums.moneysavingexpert.com/discussion/6688547/pension-for-a-young-person

You can't open a pension for her - only a parent or guardian can do that for a child (ie aged under 18). Once she reaches 18 you'll be able to contribute on her behalf IF the chosen provider accepts third party contributions. Either way, it's simplest by far to give her (or her parents) the cash and she/they can pay it in. While she has no earnings, contributions to her pension are of course limited to £3,600 gross per tax year - even as a non-taxpayer she'll get basic rate tax relief, so £2,880 paid in jumps to £3,600 pretty much immediately.

She will be going to university so this initial lump sum is just to start her off and make it simple to add to when she has an income.

When she has an income, that income might come from employment (as opposed to self employment), and the employer may have to contribute to their own auto-enrolment scheme (highly unlikely they'll contribute to any other scheme on her behalf), so it's important she recognises that.

A non-SIPP personal pension is likely to be the simplest option, unless she's mad keen to start taking her own investment decisions! A stakeholder pension is much-derided by some on this website as being old fashioned and out of date, but the modern stakeholder options make it a sensible choice for someone who might only be able to add very small amounts of cash at irregular intervals. Aviva is still open to new retail customers and the stakeholder pension can be opened with as little as £16 from you (tax relief brings it up to the 'minimum £20'): https://static.aviva.io/content/dam/document-library/adviser/pensions/sp01006.pdf

barnstar2077

Another vote here for helping her to buy her first home instead (I received some money from my grandfather after he passed away and paid it straight off of my new mortgage, it made a massive difference to my life!)

It is difficult though, as money invested aggressively in a pension early on is life changing too (Although not everyone makes it to pension age, and helping her with a house would be a great benefit that you could see her enjoying in your own lifetime.)

If you can afford to help with a house and a pension too, then that would obviously be an even more amazing gift and legacy.

Albermarle

I am sure when she is 18 she would prefer some money for driving lessons/car/Uni costs/ help with housing costs/ holidays etc. rather than wait 40+ years, when she might have a big pension anyway.

Stilernin2

Thank you everyone for you replies, there's a lot to think about here.

NormalNorman

https://forums.moneysavingexpert.com/discussion/comment/82185523#Comment_82185523

Daughter is now 18+ and I pay into her Aviva pension by both DD and extra top up payments as a payee sort code/account number/pension reference number. The only change with her being 18 is I no loger have app access as you would expect.