Pension vs ISA

[TheRightStuff]

another reason not to bother with pensions:

http://www.fool.co.uk/news/retiremen...s-swindle.aspx

[TheRightStuff]

ISAs will never be more tax efficient than pensions - don't foget the 25% tax free lump sum from pensions. You have to try very hard to construct an example of someone who won't get a tax advantage from saving via pensions instead of ISAs.

Pensions have more investment flexibility than ISAs, though for most people's purposes there's probably no difference. (Can't think of a single ISA investment that can't be held in pension, can think of pension investments that can't be held in an ISA, e.g. cash, insurance company property funds, with-profits funds, residential property (indirectly), direct commercial property.)

Even if you retire at 50/55 and start spending your pension money then, you don't have to buy an annuity until 75. Given that you have life expectancy of only about 15 years or less by then, that's probably the right option anyway for money that is earmarked for paying your living expenses.

so you put money into a pension for 30/40 yrs and end up with a pot of hundreds of 000s of £s. Then on average they only pay out for 15 yrs.

Why not just put that dosh into a high interest ISA and then draw out 25% at 50/55 and then when your 65 simply draw the money out when needed.
If you last more then 30/40 yrs then good luck to you. If you don't then at least the money will pass down to your children.

This is a ver good article http://www.fool.co.uk/school/2005/sch051219.htm

[NoddY]

In my opinion pensions carry more risk and are obviously far less liquid than an ISA. In reaching this conclusion, I assume that the longer the duration of the investment the greater it would be exposed to 'risks' i.e. changes in government policy etc.

Someone mentioned the issue of control. This is important, because it allows you to alter your investments without forfeit. Try drawing on a pension early and you'll soon learn about forfeit.

The other perspective is to see whether an asset really is an asset - i.e. does it provide an income TODAY, and in general ISA's and other high interest accounts do, albeit a very small one, but compounded over several iterations might provide a more substantial 'genuine' income.

[hyperD]

Gold, munitions, a refinery on an oil well and a bunker. For when the "horn of plenty" collapses.

[IR35 Avoider]

ISAs will never be more tax efficient than pensions - don't foget the 25% tax free lump sum from pensions. You have to try very hard to construct an example of someone who won't get a tax advantage from saving via pensions instead of ISAs.

Pensions have more investment flexibility than ISAs, though for most people's purposes there's probably no difference. (Can't think of a single ISA investment that can't be held in pension, can think of pension investments that can't be held in an ISA, e.g. cash, insurance company property funds, with-profits funds, residential property (indirectly), direct commercial property.)

Even if you retire at 50/55 and start spending your pension money then, you don't have to buy an annuity until 75. Given that you have life expectancy of only about 15 years or less by then, that's probably the right option anyway for money that is earmarked for paying your living expenses.

[TheRightStuff]

I use my maxi isa and my wifes (14K pa) as my pension I use selftrade and buy etfs (ishares). Currently have turkey (short term), china (long term) and ftse 250 (long term).

Prefer to pay the tax now then when I'm retire when i need the money the most. Anything else has gone into the mortgage which is now paid off.

Currently looking to move to a bigger property. Going to get a biggish mortgage but prefer to pay £500 p/m more into a mortgage then into a pension. I get the benefit of a bigger house for 20 years. When the kids have moved out I will downsize and use the remaining equity as a pension.

Also with a pension you can only take out 25% as a lump sum but then HAVE to buy an annuity with the rest. Wait a minute this is my money I should be able to do what I want with it.

Was looking at annuities and worked out it was better to save outside a pension for 30 yrs and then buy a couple of flats with no mortgage and use the rent as income. But 1 in my name and one in the wifes name. Sorted.

Also when both of us depart this earth the propertys move on to our daugther and any future children. With a pension once both of us are gone that's it. Why should i save hundreds of thousands of pounds which cannot be passed on afterwards.

It's a bit like contracting. Use Giant or have your own LTD. Be in control of your money. 85% of all funds do not out perform the ftse 100 in the long term. If you go for a ftse 250 you will find that has outperformed the 100 for a while.

[PAG]

ISA for me. at least I know if I die just after my retirement .... some family memeber will benefit from it !!!

don't know what will happen to pension in 35 yrs time !!!

[kingshuk]

The thing is with stocks + shares ISAs is that what you can invest in is restricted. Whatever I want to invest in, doesn't ever seem to be ISAable. Plus, even if it is, the dealing charges are higher.

True, the cost can be quite high if you are buying stocks.

I use fundsnetwork to buy unit trusts/mutual funds. The buying cost there can be quite low if you switch from a fund with 0% buying fee into another. Apart from the standard equity, money market and bond funds a fairly large number of specialist funds (commercial property, commodity etc) are also now ISAable there.

selftrade used to provide an ISA account with no dealing charge for ETFs. that was quite cheap if you are happy to construct a portfolio based on ETFs alone. A very large number of them are available now. See www.ishares.net

[Euro-commuter]

Pensions and ISAs run even from a tax point of view (ISAs you pay now, pensions later), unless your tax rate is different when you retire from what it is when you save; which indeed will be the case for most of us.

The other advantages of pensions are: no 7k/y limit, and your pension fund is "safe" from bankruptcy and creditors, and I believe from long-term care funding requirements.

The main happenstance disadvantage of pensions is the poor performance of most funds, which you can avoid with a SIPP. there is also the inconvenience that your money is locked in to them, and that when the time comes you have to put 75% of it into an annuity. The major risk in some people's eyes is that the money is locked in and visible to the Canceller: who knows what he might think of between now and your retirement?

[bobhope]

The thing is with stocks + shares ISAs is that what you can invest in is restricted. Whatever I want to invest in, doesn't ever seem to be ISAable. Plus, even if it is, the dealing charges are higher.

Not sure how many people on here make more than 8k capital gains on shares each year any way.

[lukemg]

3.5k in a SIPP. 7k in an ISA (in times of plenty naturally)

[wendigo100]

(pensions have...)
1. Too long an investment horizon and lock in period. May need the money earlier.

2. Even at the end of the investment period I can take only 25%. So its not really my money even at the end of it.

3. The pension rules keep changing. I don't know what it will be by the time I retire. Don't trust the govt.

4. Don't trust the fecking insurance companies either: they are worse than the fecking government.

Ditto all of that, although on point 4 I'd question whether anything was worse than Brown's tax-grab in 1997.

With ISAs you have some semblance of control over your fund. With pensions you've got none at all.

They used to say the tax breaks on paying into a pension were broadly in line with those on cashing in your ISA. I'm not sure how accurate that is these days.

[kingshuk]

ISA for me. Try to fill the full 7K every year. Any more spare cash goes into a high interest account.

So far no pension.

Every year I get very tempted with the idea of opening a pension account. The top up from IR is the main motivation. No amount of smart investing will give me straight away guaranteed 20% (or 40%) return in the same year.

Main reasons I haven't opened a pension account so far are -

1. Too long an investment horizon and lock in period. May need the money earlier.

2. Even at the end of the investment period I can take only 25%. So its not really my money even at the end of it.

3. The pension rules keep changing. I don't know what it will be by the time I retire. Don't trust the govt.

[EternalOptimist]

Its not possible to put enough into an ISA to guarantee your old age. I am putting as much as I can into an ISA and the rest into a high rate account. Nothing bold, but nice and predictable

[_V_]

I know the only investment that is 100% guaranteed in the UK is property investment (house prices only go up ), but do you guys believe the best place for your savings is in ISA or pension funds?

http://news.bbc.co.uk/1/hi/business/6525587.stm