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  • FIRST POST
    • GunJack
    • By GunJack 8th Mar 18, 10:32 AM
    • 10,118Posts
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    GunJack
    Additional Penson for 19-Y-O
    • #1
    • 8th Mar 18, 10:32 AM
    Additional Penson for 19-Y-O 8th Mar 18 at 10:32 AM
    Mni-Gun#1 is 19, and is about to be enrolled in works pension (NOW Pensions, min. contributions). What I'm having difficulty is deciding on what to advise him to go for as an additional private pension to make up to or exceed the "half-his-age" percentage of salary contributions...

    Relevant info:-

    1. He's saving very well towards a first property purchase already.
    2. He gets pad fortnightly.

    The amount monthly won't be a lot into the second pension, in the region of 60-70 a month initially, and he would probably prefer to pay this fortnightly, and be able to vary it up or down (or even pause for a while) easily as the house-saving allows.

    Ths is where I'm having problems in whether SIPP, Stakeholder or Personal Pension would suit him better?

    Any pointers would be most welcomed.....I've learned a lot on this part of the forum over the last couple of years, but this one I'm not sure about...
    ......Gettin' There, Wherever There is......
Page 1
    • Riff Raff
    • By Riff Raff 8th Mar 18, 10:51 AM
    • 18 Posts
    • 12 Thanks
    Riff Raff
    • #2
    • 8th Mar 18, 10:51 AM
    • #2
    • 8th Mar 18, 10:51 AM
    Would it not make sense to make maximum contributions to his workplace pension first, to get the maximum employer contribution, before thinking about an additional pension?
    • GunJack
    • By GunJack 8th Mar 18, 11:05 AM
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    GunJack
    • #3
    • 8th Mar 18, 11:05 AM
    • #3
    • 8th Mar 18, 11:05 AM
    Would it not make sense to make maximum contributions to his workplace pension first, to get the maximum employer contribution, before thinking about an additional pension?
    Originally posted by Riff Raff
    It would do, IF the employer matched extra conts., but they don't. TBH, He'll need somewhere to transfer the works one to as/when he changes employer to one with a different scheme anyway..
    ......Gettin' There, Wherever There is......
    • cloud_dog
    • By cloud_dog 8th Mar 18, 11:33 AM
    • 3,695 Posts
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    cloud_dog
    • #4
    • 8th Mar 18, 11:33 AM
    • #4
    • 8th Mar 18, 11:33 AM
    To keep it simple (at this early stage), a number of people like the Aviva Personal Pension via Cavendish. This involves a one off commencement fee (35) but then you benefit from lower Aviva PP charges.

    The other option is to work out if going for a Cavendish SIPP (for example) would work out cheap, i.e. 0.25% platform fee plus the relevant fund charge itself. You would need to beat 0.75% for the Aviva offering.

    Afraid, I cannot comment on how easy / difficult it is to modify your payment amount of if they even provide a fortnightly payment capability (it is quite unusual) as I do not use Cavendish .
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • GunJack
    • By GunJack 8th Mar 18, 11:49 AM
    • 10,118 Posts
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    GunJack
    • #5
    • 8th Mar 18, 11:49 AM
    • #5
    • 8th Mar 18, 11:49 AM
    To keep it simple (at this early stage), a number of people like the Aviva Personal Pension via Cavendish. This involves a one off commencement fee (35) but then you benefit from lower Aviva PP charges.

    The other option is to work out if going for a Cavendish SIPP (for example) would work out cheap, i.e. 0.25% platform fee plus the relevant fund charge itself. You would need to beat 0.75% for the Aviva offering.

    Afraid, I cannot comment on how easy / difficult it is to modify your payment amount of if they even provide a fortnightly payment capability (it is quite unusual) as I do not use Cavendish .
    Originally posted by cloud_dog
    Thanks, just looked at cavendish, the personal pension is out, min 200 per month input, but the stakeholder may be a goer, min 20 per month input but will need to check on the variation/paused payments.
    ......Gettin' There, Wherever There is......
    • cloud_dog
    • By cloud_dog 8th Mar 18, 1:27 PM
    • 3,695 Posts
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    cloud_dog
    • #6
    • 8th Mar 18, 1:27 PM
    • #6
    • 8th Mar 18, 1:27 PM
    Yes, it was the stakeholder version, here, I thought I was referring to. Apologies.

    This is the approach I would consider.

    You say:

    "1. He's saving very well towards a first property purchase already."
    by GunJack
    Is he using LISA(s) for that?
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Brynsam
    • By Brynsam 8th Mar 18, 2:26 PM
    • 956 Posts
    • 627 Thanks
    Brynsam
    • #7
    • 8th Mar 18, 2:26 PM
    • #7
    • 8th Mar 18, 2:26 PM
    It would do, IF the employer matched extra conts., but they don't. TBH, He'll need somewhere to transfer the works one to as/when he changes employer to one with a different scheme anyway..
    Originally posted by GunJack
    Why complicate things needlessly by setting up another pension arrangement? He can make one-off/single contributions on top of regular contributions via payroll. The advantage is that he gets tax relief immediately (NOW operates as 'net pay' arrangement, so contributions are taken from pre-tax pay). If he's planning to make a regular monthly contribution his employer should be able to cope with that.

    He won't 'need' to transfer his pension anywhere when he changes jobs; it can stay put, or he will almost certainly be able to transfer it to his new employer's scheme, if that offers lower charges.

    Be careful about 'advising' your son unless your own knowledge is adequate. Being a well-intentioned parent is an excellent thing, but we are in the fantasy world of pensions here....
    • Triumph13
    • By Triumph13 8th Mar 18, 3:19 PM
    • 1,180 Posts
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    Triumph13
    • #8
    • 8th Mar 18, 3:19 PM
    • #8
    • 8th Mar 18, 3:19 PM
    I'm guessing he is already fully using his LISA allowance to save towards the house?
    Is the career he has embarked upon one which has a good chance of being a higher rate tax payer in the future? If so then I might be inclined to go the S&S ISA route for now and then move it to a pension at some future point when he might get more tax relief. (The converse is that if he currently gets working tax credits but won't in the future then pension now wins)
    • enthusiasticsaver
    • By enthusiasticsaver 8th Mar 18, 3:19 PM
    • 6,403 Posts
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    enthusiasticsaver
    • #9
    • 8th Mar 18, 3:19 PM
    • #9
    • 8th Mar 18, 3:19 PM
    I would think paying into his existing pension would be more sensible. Even if the employer contributions are already at maximum it would probably be cheaper from a fee point of view and more tax efficient. He does not have to transfer out when he changes employers unless the new one is better. I think at his age just having one pension makes sense for now. What is the pension invested in?
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    • JoeCrystal
    • By JoeCrystal 8th Mar 18, 3:33 PM
    • 1,405 Posts
    • 861 Thanks
    JoeCrystal
    Mni-Gun#1 is 19, and is about to be enrolled in works pension (NOW Pensions, min. contributions). What I'm having difficulty is deciding on what to advise him to go for as an additional private pension to make up to or exceed the "half-his-age" percentage of salary contributions...

    Relevant info:-

    1. He's saving very well towards a first property purchase already.
    2. He gets pad fortnightly.

    The amount monthly won't be a lot into the second pension, in the region of 60-70 a month initially, and he would probably prefer to pay this fortnightly, and be able to vary it up or down (or even pause for a while) easily as the house-saving allows.

    Ths is where I'm having problems in whether SIPP, Stakeholder or Personal Pension would suit him better?

    Any pointers would be most welcomed.....I've learned a lot on this part of the forum over the last couple of years, but this one I'm not sure about...
    Originally posted by GunJack
    While I agree that he should be paying more into his pension pot since minimum contribution will be no way near enough, I think it would be easier for him just to stick with a single pension pot, less hassle for now. However, he really needs to think how much more he should be paying into the pension pot. You rightly pointed out that there is a rule of thumb that says that you should save half your age as a percentage of your salary when saving in a pension. I believe that is no longer a reasonable rule of thumb. If a 19 year old person on 16,000 salary contributed a combined 10% into the pension pot for the next 49 years for example and want to get an up to 5% index-linked annuity with 50% spousal income, it will only yield 1,950 or estimated pension pot of 111,000. Having said that, 49 years is a long time and considering how forty years ago was very different pension landscape, it is likely that 40 years down the line, it would be quite different (and hopefully much easier to retire on).

    It is certainly worth for your son try various pension calculator out to see how much it is possible. This one is what I generally use: https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator
    Last edited by JoeCrystal; 08-03-2018 at 3:37 PM.
    • Riff Raff
    • By Riff Raff 8th Mar 18, 3:36 PM
    • 18 Posts
    • 12 Thanks
    Riff Raff
    Paying in through payroll has the advantage of the money never touching your current account, so you're less likely to mess with it. Even if he's a very sensible person, 19 is young to be thinking about pensions (great if you are, but most aren't).
    • Dox
    • By Dox 8th Mar 18, 4:59 PM
    • 518 Posts
    • 311 Thanks
    Dox
    What I'm having difficulty is deciding on what to advise him to go for as an additional private pension to make up to or exceed the "half-his-age" percentage of salary contributions...Ths is where I'm having problems in whether SIPP, Stakeholder or Personal Pension would suit him better?
    Originally posted by GunJack
    This sounds more like a parent plan than a pension plan! The poor kid's a teenager; why on earth would he want to tie up all his earnings in long term plans? He needs to be having (at least some) fun now. Saving 'only' 60-70 a month into a pension as well as saving for a house....don't make him middle aged before he needs to be.

    Of course it's important to save for retirement and to save as much as you can as early in life as you can afford it - but not at the expense of doing some living today.
    • GunJack
    • By GunJack 8th Mar 18, 5:12 PM
    • 10,118 Posts
    • 7,577 Thanks
    GunJack
    Is he using LISA(s) for that?
    Originally posted by cloud_dog
    He will be... missed the Skipton deadline to transfer into this year for cash LISA but may be able to squeeze him on a S&S one before end March, now the deadline has passed we have another week or so to consider strategy

    Thanks for the comments/observations. To clarify some stuff:-

    1. unlikely to be HRT payer
    2. unlikely to get tax credits
    3. he's keen to get on the property ladder and he can do it relatively cheaply round here
    4. should be in a position by this time next year to buy first house (esp. if he can get LISA bonus)
    5. he really won't miss the extra pension conts., like I said he's pretty sensible
    6. plus, if he starts the second one now, he won't need to up the conts. into it for a while as the auto-enrollment increases in 18-19 and 19-20 will up his overall percentage naturally
    Last edited by GunJack; 08-03-2018 at 5:26 PM.
    ......Gettin' There, Wherever There is......
    • Terron
    • By Terron 8th Mar 18, 7:53 PM
    • 223 Posts
    • 195 Thanks
    Terron
    My suggestion is one thing at a time Get a property first then think about boosting his pension.
    • Alice Holt
    • By Alice Holt 8th Mar 18, 8:04 PM
    • 2,027 Posts
    • 2,344 Thanks
    Alice Holt
    My suggestion is one thing at a time Get a property first then think about boosting his pension.
    Originally posted by Terron
    And he will need an emergency full for house maintenance.
    Plus the moving in costs / furniture etc.
    • kidmugsy
    • By kidmugsy 8th Mar 18, 9:57 PM
    • 10,562 Posts
    • 7,233 Thanks
    kidmugsy
    How's his motorbike fund doing?
    Free the dunston one next time too.
    • GunJack
    • By GunJack 8th Mar 18, 10:24 PM
    • 10,118 Posts
    • 7,577 Thanks
    GunJack
    How's his motorbike fund doing?
    Originally posted by kidmugsy


    He likes the warmth of his car too much
    ......Gettin' There, Wherever There is......
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