Pension For 22 Year Old Self Employed

[Stargazer]

My grandson asked me how to go about getting a pension organised. He is a self employed bricklayer and is on a high rate of pay. Has always been self employed.

[chelle7272]

Some good advice here;
https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/pensions-for-self-employed-people

[Stargazer]

Thank you.

[Peter Pedant]

Full marks for thinking bout it so young
I would kick off with a stakeholder
and then shop around

[Ellipsis]

Having made many mistakes with pensions and investments over the years, my best advice to your grandson would be to get a decent financial adviser.

One good place for an adviser unbiased.co.uk
Start here: https://www.unbiased.co.uk/
Then click on Retirement
Then click on Retirement Planning
Then make your choices from there.

Another good place to look is vouchedfor.co.uk
Start here: https://www.vouchedfor.co.uk/IFA-financial-advisor-mortgage
Then make your choices from there.

[AuntPG]

If he's a brick layer I would suggest putting his money into property. He has a long way to go before pension age and basically, he could lose it all if the economy goes downhill like it has done before. he is self employed there may be periods where he cant work therefore cannot put into his pension.

I am totally biased against private pensions, seen too many people get their fingers burnt .Tell him to save as much as he can then buy a small property at auction, do some work on it then sell and repeat.

[AuntPG]

...or rent out.

[Peter Pedant]

// ...or rent out.//

let - - - let - - - or let = = = = landlords let on a lease. ( tenants rent)

[AuntPG]

sorry PP I could play the 'L'anglais n'est pas ma langue maternelle' card ...............

but I really have no excuse :-)

[Hymie]

I would agree with AuntPG, pensions are only worthwhile where someone else (your employer) is contributing to the plan.

Many a financial adviser will point out the tax advantages of a pension; for every £100 you pay into the plan will gain an extra £25 due to the tax relief (for a basic rate tax payer).

But consider you have built up a pension pot by paying in a total of £100k, due to tax relief the total value will be £125k. Whereas someone who had not taken advantage of the pension tax relief would only have savings of £100K.

But the person who paid into the pension plan will have to pay tax on their money from the pension pay out – on top of this they are likely to have been charged a 1% annual fee for administering the fund.
In comparison the person with the £100k savings will pay no tax accessing their own savings.

[Maydup]

I'm lucky enough to have benefited from employer contributions to my pension fund plus good independent financial advice (also paid by the employer)which has resulted in 28% growth in the fund over the last year.

However, if I were advising a younger self employed bricklayer I'd suggest saving the money in an ISA an use it as a deposit on a small holiday rental. The income is good, there is no issue with tenancies and the property will always be there for him.

A pension is a very sensible tax efficient savings scheme for those with employers match funding, but without that and a real risk of the age at which you can access it increasing, I would be cautious.

In recent years the age at which you can access your own private pension fund has risen from 50 to 55 and goes up to 57 very soon. It could easily rise to 60 or higher by the time your grandson reaches that age. Should he wish or need to have access to money before then he would have more control if he owns property.

[Stargazer]

Thank you to everyone who has responded with advice. He is actually buying the house he is living in at the moment so probably not thinking of buying a second house.

[AuntPG]

Stargazer, This is not about buying 'second home' though, its about investing in property rather than giving money to a pension fund that could fold. The stock market could crash, he could need the money in 20 years' time for emergencies and not be able to access it. - too many variables.
Investing in property or land is the better way forward. With his skills he could buy a small terrace to renovate and sell on, invest the profits into buying another and so on. Many self-employed tradesmen do this, it makes sense and as has been said on the thread already, he will not benefit from the Employer contribuions to a pension so would have to put a considerably amount down each month to get anywhere near a decent pension in at east 40 years' time.

Financial Advisers will not advise or suggest this as they will get no Commission!

[Ryzen]

APG...spot on..however keep your eye on the tax man...a property raid is imminent!!

[bednobs]

it seems unlikely that if a 22 year old is buying his own home to live in, he;ll be able to/want to get another mortgage for another place too

[Ryzen]

If he's a good bricklayer..with a good credit score.. a buy to let mortgage will be easily available for a 2nd home if the rental yield covers the debt.

[bednobs]

it's pretty huge undertaking for a 22 yo is what im saying. I remember feeling pretty overwhelmed in borrowing money for my first mortgage which at the time was less than 100K. doing that twice at today's prices seems like it might be a bit big

[AuntPG]

Bednobs I tend to agree. 22 is far too young to be thinking about pensions and maybe a bit young to be thinking about investing. I would suggest he just saves as much as he can into a normal savings account, then launch into his property investment when he hits his early 30's .