Tax relief: who gets the benefit?

dunstonh

When you compare ISAs and personal pensions on a like for like minimal charges basis, the advantage conferred by the pension and its so called "tax relief" over the ISA to the basic rate taxpayer is a mere 6% rise in income when retired.This is very piddling considering you give up access to your capital forever.

Although I agree with you very much on the pension vs ISA front. There are times where what is financially best is not the best solution. Some people need the tie in with the pension product because they cannot be trusted to leave money there until retirement. Most in that situation know that as well.

There is also the fact that annuity income can be higher than ISA income at the right ages and that income takes priority to capital for a number of people.

In addition, you have to consider working/children tax credits which can be improved by commencing a pension. In effect this increases the effective tax relief.

As it happens, the stakeholder pension offers great potential for those already retired or for grandparents wanting to leave some money for their "under age" grandchildren.