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Original poster

How do I pick a pension for my son?

26 replies

MotionActivatedDog · 08/07/2021 13:24

He has just got his first job and it pays very well. He’s a sensible lad and wants to save as much as he can. There is a work place pension however this job will be unlikely to be a long term job as he is still in education and will be for some time so I’m not sure if he should put extra into that pension? If he can? Or should he have a separate private pension. How much should he pay in? 10% of his wage?

I am one of those fools who has no pension so id like to start him off with good habits in the hope that he doesn’t find himself financially feckless like his mother.

And guidance gratefully received.

OP posts:
fromdownwest · 08/07/2021 13:52

How old is your son?
Would this not be a decision he would be making?

Original poster
MotionActivatedDog · 08/07/2021 13:54

He’s almost 16 and he is asking me to help him sort a pension. He has no idea where to start. So here I am. Also with no idea where to start.

OP posts:
Palavah · 08/07/2021 13:56

A good idea to find out the terms of the workplace pension - fees, % contribution from the employer, etc.

fromdownwest · 08/07/2021 14:00

If he is 16, then I would just stick with the work place pension.
It would be low cost and simple.
They are not obliged to match his payments, however, it is worth him asking.
He can then move that pension when he leaves the company

Original poster
MotionActivatedDog · 08/07/2021 14:24

Thanks both of you. Do you know if there is a good website that explains pensions and what a person needs/should look for?

OP posts:
KatyPerrysMustang · 08/07/2021 14:26

www.moneyhelper.org.uk/en/pensions-and-retirement

Ducksurprise · 08/07/2021 14:30

At 16 a Workplace pension and then a savings account. Building up for a deposit on a house could pay out more in later life than most pensions. He will need accessible savings for his near future which is as important as his far future.

Tickly · 08/07/2021 14:33

What a very sensible approach. Not sure about website guidance. Maybe try googling pension basics? it's worth you thinking about

  • making sure whatever funds his pension gets invested in are higher risk ones at his age. The value will fluctuate more than a more cash based or conservative asset one but over time it's performance should be better. From memory, the Govt standard Nest pension isn't higher risk. His employer if it is a private pension arrangement should be able to give him options on risk level for investments.
  • employer they should also be able to let him contribute more than whatever their standard % is. However they may or may not match this (eg mine matches up to 5% but I can put in more).
  • personally I also check if the funds invest in assets that have good environmental, social and governance policies.

(there are independent advisors who can give detailed advice on this sort of thing - I'm not one, just passing on what I was told).

Original poster
MotionActivatedDog · 08/07/2021 14:39

@Ducksurprise

At 16 a Workplace pension and then a savings account. Building up for a deposit on a house could pay out more in later life than most pensions. He will need accessible savings for his near future which is as important as his far future.
Thank you. I hadn’t thought of it this way.
OP posts:
Original poster
MotionActivatedDog · 08/07/2021 14:39

[quote KatyPerrysMustang]www.moneyhelper.org.uk/en/pensions-and-retirement[/quote]
Thank you @KatyPerrysMustang

OP posts:
Original poster
MotionActivatedDog · 08/07/2021 14:40

@Tickly

What a very sensible approach. Not sure about website guidance. Maybe try googling pension basics? it's worth you thinking about
  • making sure whatever funds his pension gets invested in are higher risk ones at his age. The value will fluctuate more than a more cash based or conservative asset one but over time it's performance should be better. From memory, the Govt standard Nest pension isn't higher risk. His employer if it is a private pension arrangement should be able to give him options on risk level for investments.
  • employer they should also be able to let him contribute more than whatever their standard % is. However they may or may not match this (eg mine matches up to 5% but I can put in more).
  • personally I also check if the funds invest in assets that have good environmental, social and governance policies.

(there are independent advisors who can give detailed advice on this sort of thing - I'm not one, just passing on what I was told).

Thank you. This is really helpful.
OP posts:
FanSpamTastic · 08/07/2021 14:48

He could look at opening a LISA - a Lifetime ISA. Not sure if he needs to be 18 though?

A LISA can either be used to save a deposit for a first house - the government will give a proportion if used for a house. If not used for a house then it can be used as a pension pot.

Original poster
MotionActivatedDog · 08/07/2021 14:58

Thanks @FanSpamTastic, I’ve just a google and he needs to be 18 for a LISA but that is definitely something I can remind him about when he is closer to the age.

OP posts:
aramox · 08/07/2021 15:01

What kind of job? Asking as parent of a similar age. Sounds amazing.

Original poster
MotionActivatedDog · 08/07/2021 15:03

Factory work @aramox

OP posts:
Original poster
MotionActivatedDog · 08/07/2021 15:05

I’m very happy for him as it is a huge local employer and if he sticks it out there are loads of opportunities to move up.

OP posts:
Hadalifeonce · 08/07/2021 15:07

Find an independent financial advisor. Preferably one recommended by someone, but they should be able to show examples of portfolios and how they have grown on average.

Badoukas · 08/07/2021 15:37

I started stakeholder pensions for my children then transferred the pots to Vanguard Personal pensions now that they are over 18. It's great to start early even with small amounts.

Original poster
MotionActivatedDog · 08/07/2021 15:59

@Badoukas

I started stakeholder pensions for my children then transferred the pots to Vanguard Personal pensions now that they are over 18. It's great to start early even with small amounts.
I have no idea what this even means! Blush

I need to do some reading.

Thank you all.

OP posts:
TotorosCatBus · 08/07/2021 16:47

My teens invest in a LISA. The government topups make it very appealing.

Dyrne · 08/07/2021 17:01

He should definitely participate in the workplace pension if his employer make contributions too - it’s “free money” so good to build it up as early as possible. If he does move jobs he can easily merge his old one, or leave it sitting there growing depending on the fees etc.

I agree with cautioning against shoving everything into a pension at the expense of other investments - saving for a house deposit would also set him up very nicely.

BeeLady15 · 08/07/2021 17:11

I always think it’s better to gather a deposit for a home first before locking money away until you retire. He may well need this cash sooner for a home or education. 16 is very young to be paying in to a pension when he has nothing else sorted first

MrsWombat · 10/07/2021 12:23

If his employer will match what he puts into their pension then definitely do that as it's free money. He shouldn't go above and beyond a match though at his age. A low-cost private pension (try Vanguard at 18 for a SIPP or AJ Bell for a Junior SIPP now) would be good to have as he could move his work pensions over to it when he leaves each employment. (Depending on fees etc, and if it's a defined benefit pension then it's generally better left where it is)

I think what I would do in your shoes is help him set up a private pension, put in a token amount invested in 100% equities (Vanguard Global All Caps is popular but Vanguard also have target retirement funds if you want to set and forget), so it's ready to move his student jobs pensions over when he leaves then concentrate on his emergency funds and LISA and ISAs. When he's left university and has his first proper job he can reevaluate everything. (And hopefully they'll be a bit of growth on what you've put in which will encourage him to invest more)

This flowchart is always helpful: flowchart.ukpersonal.finance/

StCharlotte · 13/07/2021 23:23

He'll have to ask to go into the workplace pension as he won't be eligible for automatic enrolment until he's 22.

WombatChocolate · 16/07/2021 09:20

Did you say he’s not yet 16? If so, he won’t be able to enrol in a workplace pension. Most employers don’t take anyone on until at least 16 these days.

Is this a temporary student job? You mention opportunities to move up, so is he seeing this as his career and long term job?

I’d say the key is to get into a savings habit at this point. There are various accounts which offer 2-3% interest on small sums up to a couple of thousand. Presumably he cannot drive yet and things like driving lessons might need to be saved for. Getting several thousand in The bank, if he doesn’t have this already is actually more useful in his teens than having a pension.

Kids who go to uni don’t enter the work place properly until somewhere around 22-25 these days. They start their pensions then and that is fine. Remember, pension savings are not accessible until 57-8 (from 2028) but he will need access to money for house deposit etc far before then.

It could be good to have a current account and then also a couple of savings vehicles…one for short term savings goals, such as the driving lessons, or uni, and one for longer term goals like saving for a house. The pension strikes me as less important at this point. I asssume he won’t earn much so any savings will be limited and he would do better to save for the closer future than retirement future at this point. Certainly, as soon as he’s in full time work, he should be in the pension.

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