Recommend a SIPP for a 22 year old Student

As above really. An acquaintance is still at uni, but works her butt off when not studying and has grown a decent savings pot. She has a year in Aus coming up, but I said she should start contributing to a SIPP asap. When she is not in Uni she is working as a contractor to an agricultural business.

So any better ideas that pointing her at a Vanguard SIPP ?

IANAFA, but at that age you want the lowest charges and a global tracker so a Vanguard SIPP and their ESG Developed World All Cap Equity Index Fund – Accumulation is probably as good a bet as anything.

I’d say they’d be far better off keeping it available for house purchase.

+1

Unless they’re earning a lot then a lifetime ISA is as tax efficient as a pension.

Encourage her to fill in a tax return.

Look very closely at fee structures on SIPPs. She likely has a small amount so the fixed fee ones are worse for her. Who has the lowest % fees? Vanguard is probably close.

Controversially i’d say not to bother with a Pension at that age.

The moneys going to be locked up for at least 30 years, and there will be other things which require the cash in the short/medium term (Australia trip/House purchase/etc..)

Yes you might miss out on the compounding and tax benefits, but you’ll be far better placed to make the most of these benefits once you hit the higher tax band.

I don’t think it’s controversial, especially for a student! I think it’s crazy for someone that young to be locking away a chunk of savings when they still have massive capital outlays to worry about (and no full time salary).

Is she putting the money away herself or is an employment related one that her employer also contributes to?

If she’s doing it herself, then she should do a tax return to get the tax relief on it as pension contributions are deducted before tax is calculated. Employer related pensions are great in that often up to a certain % they’ll match your contribution, thus doubling your investment before you’ve even started.

Personally I’m currently using Hargreaves Lansdown and they’ve been pretty good so far, but then they’re just a wrapper for investing in other people’s funds. I also like their active savings which mean I can have savings products with other institutions through them too, thus making shopping around for the best rates a doddle.

It’s up to her what she does with her spare cash, there’s no harm locking it away for retirement now as it’ll have the most time to grow. If she’s thinking it’d be useful when she’s back from travelling then a fixed term high interest saving product may be a fair idea, or even a Stocks & Shares ISA.

Tell a 40 y/o with no pension savings how much they will need to pay in, then tell them what that would be if they started small in their 20s……….