Pension for a student

[GardenDecking]

Thinking of getting my student DD to open a pension.
Am I correct in saying she can put in £2880pa (she has been earning a small amount but not anything into a pension).
Can three years be carried over?
So can she pay in £2880 for this current year and 3x £2880 for previous years = £11,520?
And if so, does she have to inform HMRC that she has done that - or do they work it out themselves?
Thanks.

Does she have a job at all (part time or holiday) which gives her earned income?. If so that might make a difference.

Otherwise she can only put in £2880; she can't pay in in respect of prior years

She can pay in 100% of her salary or £60,000 whichever is lower and still receive tax relief. I know the Annual Pension Allowance of £60,000 rolls forward but I'm not sure about the 100% of salary. If she pays in more than she is allowed she will have to pay a pension charge, she should self declare this although if she doesn't it will be hit and miss if HMRC ever find out BUT if they do there will be penalties

Is this the best use of her small salary though? Does she already have a deposit for a house? Have you looked at a LISA instead.

Sorry meant to say or £2880 if she earns less than the tax threshold.

Thanks for the replies.
She has a seasonal job - I’m pretty sure she hasn’t been enrolled in any workplace pension scheme (she was on a zero hours contact for a while then went onto 14 hours a week for a couple of months)
She probably earned around £10k in the year (will have to check).
So will this mean she can pay up to the £10k in or still the £2880 (if she hasn’t paid tax due to it being below the personal tax allowance)?

We have received an inheritance and would like to give it her via getting her to use her pension allowance and LISA/ISA allowances.
So just trying to figure out the pension element of it.
Thanks.

In her case she can pay in any amount up to 80%. of her earned income (which will then become an amount equal to 100% of her earned income in the pension after the govt tax credit tops it up).

Thank you.
So around £8k can be paid in this financial year.
I assume we should look at a SIPP via nutmeg, AJ Bell (Dodl) and the like.

Vanguard and A J Bell always used to be the go-tos but there've been a lot of changes in fee structures recently especially impacting smaller pots. I'd consult money saving expert or similar on that - you'll want a fee structure that doesn't penalise a small pot.

Argh - back to being confused again.
She earned £7600. And apparently maybe paid a bit of tax in one or two of these months.
She does not have a wage slip with YTD on it.
She can put £7,600 x 80% =£6,080.00 into a pension, this then gets topped back up to £7,600 when the pension provider claims it off the government.
Is this correct?
That money claimed back is supposedly tax relief - but she hasn’t paid any (or very little) - so how does that work?

Right - found this:
“So the relief at source method is advantageous for non-earners, or for individuals making contributions based on earnings within the personal allowance. This is because basic rate relief is given even where no tax is actually being paid.”
So, it’s a wee bonus in a way

Yes we did similar for our son and have continued to put in £2880 while he his at uni. It soon adds up. His is with AJ Bell too

Sounds like you are being very sensible about this re the SIPP, LISA and ISA. Don’t forget if you get the full amounts in each before 5th April you can do it all again the next week depending on how much you are able to save. With the SIPP if you are making contributions based on earnings rather than the £2880 for a non earner you would be best waiting until she actually has earnings to use and drip feed during the year. I am doing this for all DC.
We also use AJBell for SIPPs and LISA but various for cash ISA depending on the interest rates.

I work pt and earn under the tax threshold - I put 80% of my earnings into pensions and get 20% added on through the pension provider (it happens automatically, I don't need to apply for it or contacr HMRC). My pension contributions are split across a work pension and a SIPP (just because my employer contributes the minimum, and it makes it easier for my pension contributions to be tracked for Carer's Allowance, but that wouldn't be relevant for your DD). I prefer using the SIPP as I've had good returns using a high risk approach and there are more investment options than my work pension. I would use a SIPP in your DD's case.

From savings I also contribute £4k a year to a S&S LISA (for retirement, not house purchase) and £16k a year to a S&S ISA. The S&S LISA gives an equivalent top-up to the pension and it is also tax-free on the way out, and the S&S ISA has no tax advantage on the way in but is untaxed on the way out, plus it can be used earlier than a pension or LISA.

Be aware that ISAs and LISAs will be considered as assets if she ever needs to claim UC and potentially exclude her from claiming if she has over £16k. But money in a pension won't be counted as assets until she is old enough to tak money from it.

Yes, that’s correct. For someone in your DD’s position it isn’t tax relief, it’s pure bonus, ie free money. Not enough people know that!

How does it work - well it’s the government’s incentive to get people to save into a pension. I guess that makes it simpler to administer too as the different departments don’t have to talk to each other to see if you’ve paid tax or not.