Personal Pension advice wanted

[Nondescriptname]

My DD is 36 and has always been on benefits because of illness.
I would like to make contributions to a personal pension, for her, but I know nothing about how to do this.
Am I best to ask a financial advisor, or what?

IFA / Pensions Advisor

Thank you.
Is there any way of trying to be sure we get good advice / a good advisor?

Your best bet is to ask relatively well off friends who they use - personal recommendation trumps everything else with IFAs

Is it the sort of thing where an advisor would give us figures for a few companies so we can try to decide what's best from those?

The standard advice always seems to be to see an IFA. My only experience of an IFA for a pensions review was that he wanted a fairly substantial regular slice of my pension pot even though I made it clear I wanted one-off advice.
You could try the DIY route via a SIPP on one of the platforms such as Hargreaves Lansdown or Nutmeg. Your DD would have to open an account herself and you could transfer money to her to invest.

If she is on benefits without income you can pay in £3600 gross per annum so £2880 net. If you can pay in monthly as you will benefit from pond cost averaging

Thank you, Lunaballoon. I'll look into that.

What is pond cost averaging, littlebillie?

She has no income, other than benefits. Do you mean that she gets some sort of tax relief although she doesn't pay tax?

My income is pensions from state & from previous employment, if that's relevant.

Pound cost averaging just means that if you buy 'units' in a pension each month, then you average out the price that you pay for it.

EG The Pension fund XYZ costs £1 per unit

Month 1 your £100 buys 100 units

If in month 2 the price falls to 50p per unit, your £100 buys 200 units

So you hold 300 units and it cost you £200

Conversely, if the unit price goes up, you get less.

Over time, it is a great way to have to avoid 'timing the market' with a lump sum.

Correct on the tax relief for non earners.

Your income is irrelevant to your daughters pension, as it i based on her income, even if a third party is paying

The standard advice always seems to be to see an IFA.
Because it's a minefield and you can get into trouble for giving wrong advice.

As a matter of interest: why a pension as opposed to any other sort of saving?

That explanation is very helpful, fromdownwest, thank you.

senua, there's a limit on how much a person on benefits can have in savings.
I understood that a pension is exempt from being included in that.
I also thought it would be a good use of some of my money, now, to set up a (small) income for her future, in addition to whatever state pension still exists by then.

I would just set up the lowest cost stakeholder pension you can find. If you do get an IFA make sure you understand their fees (many recommend the products they get most fees from)

The standard advice always seems to be to see an IFA
Because it's a minefield and you can get into trouble for giving wrong advice

IFAs are indeed highly regulated but in my experience the person I saw was primarily interested in getting a slice of my already decent sized pot. I was happy to pay for a review of my various pensions, but he steamrollered me into agreeing to ongoing advice and a monthly percentage of my pot. I quickly cancelled the arrangement after his hard sell.

You don’t need an IFA for this. Just google Sipps and choose a provider. I’ve done pensions through legal and general for my kids this way.

Retirement ISA. I've looked into it. You can pay in up to £4,000 a year and the government will top up by 25% every year of what you pay in until you're 50 (your DD is 50). It then sits gaining a good interest rate for 10 years and you can draw it out how you like tax free from 60. It cannot be touched at all until you're 60

The biggest benefit of a pension, is the tax relief - but she’s very limited on that. (£3600pa gross cap for tax relief as a non earner)

Probably the next biggest benefit for her is what you have said - it is exempt from benefit thresholds.

But given that she won’t get much tax relief on it, why don’t you just carry on saving it yourself? At least anything over £2880 (grossed up to £3600). Then you don’t lose the flexibility of it not being accessible until she is 55 (or older, there was a white (?) paper, currently not enacted) to tie that to state retirement age -10 years.

Unless you want to reduce your own savings in case of care home costs, you have access to exactly the same investments via an ISA for you, as you do via a pension for her. But then you’re not locking away the money.

@JenniferM1989 is the retirement ISA not treated the same way as a lifetime ISA for benefit calculations?

The retirement is or LISA is treated as income for benefit purposes.

Another thing to consider with a pension vs you holding onto the money (investing it in your name) is that if you put it into a pension in her name, then when she draws that pension, it is income.

And that means: tax.

So she could end up paying income tax on money that you’ve already paid tax on! Obviously depending on the amount - full state pension is still over £3K pa below basic income tax threshold, and she could take 25% tax free. So probably not a problem - but keep it in mind if you’re looking at larger sums.

Yes, you're both right. I never thought of that. I'm not on benefits so it won't affect me but it won't be an option for your daughter OP

Thank you for the replies.
Yes, I wanted to have provision that is hers and couldn't be taken for future care costs.
I hope I don't need care for a long time, if ever, but I'd like to set aside something to help DD that will be safe from being included in care calculations.