ISA or Pension

deemy2004

whiteflag wrote:

Hello Deemy , you wrote



Deemy can you explain....what is the difference between projections from pensions and projections from ISAs?.

Ive just run projections for both on exactly the same terms ( nil intial 0.5% fund based trail) in the same fund
why would the pension projection be complete BS as you say?

Heres the figures - £583.00 per month for 20 years

ISA (5%,7% and 9%) 195,000 , 241,000 , 301,000
Pension 277,000 , 347,000, 437,000

Of course the Pension figures dont include the benefit of any additional relief for higher rate tax payers!.

A projected fund @ 7% of 106k more for the pension must be worth considering as the opportunity cost of giving up "control"?

Cash ISA - The difference is that taking a reasonable % on the cash isa of say 5% (though a year ago you could have fixed it for 5 years at 6% ... and say a pensions fund is that with the cash-isa there is a 90% probability that you will hit your projection.. with a pensions stock fund there is a 90% probability you WON'T HIT IT ! It could go either up or down significantly.. and recent experience has been to the downside. You might as well as said Cash ISA £250k, Pension fund £1,000,000 for when they retire it may be £50k ...

So your infact gamblign with your retirement provision ! and hence pension projections are worthless as many of those retiring today are finding out.. that what they thought they would get and what they are gettign has a BIG difference !

Play SAFE - Go with CASH ISA.. or if you like to gamble take a pension fund wrapper with a stock portfolio or perhaps a mixture of the two hence a self-select isa component for the 4k remaining of the ISA allowance

whiteflag_3

The difference is that taking a reasonable % on the cash isa of say 5% (though a year ago you could have fixed it for 5 years at 6% ... and say a pensions fund is that with the cash-isa there is a 90% probability that you will hit your projection.. with a pensions stock fund there is a 90% probability you WON'T HIT IT !

Ah I see, your not comparing apples with apples. I thought you were talking about wrappers in your original post when you were talking cash ISAs and equity related funds.

Play SAFE - Go with CASH ISA

Why not invest in pension in a cash fund. Surely the same risk as a cash ISA but you get the tax relief.

dunstonh

whiteflag wrote:

Dunstonh are you serious? :eek:

Yes. Been there, been through it. Came out the other side knowing a lot more about what is and isnt allowed.

In my case, nothing came of it as the the thread submitted to the FSA was incomplete with posts missing and I had stuck to generic discussion. Ironically, it was a thread on AVCs vs PEPs. Not too far removed from this thread. However, a written response to the FSA was still required supporting the comments made and highlighting the inaccuracies by the person that sent the thread to the FSA. Along with a few phone calls and the rather long wait to hear they had closed the case. In the end it was treated as a spurious complaint with the comment made that it was good to see generic discussion taking place.

So, whilst you have a few posters here thinking they can get away with anything, forgive me if I am a little more cautious.

EdInvestor

In the end it was treated as a spurious complaint with the comment made that it was good to see generic discussion taking place.

Precisely.This is the official view. Discussion is to be encouraged.They have said they are always getting spurious complaints from people who don't agree with what other people say on websites. These don't result in any action, obviously.

The only thing they are worried about on websites is ramping of individual shares, which doesn't happen here.This is the only area they have taken action in more than 5 years.

There really is no need to be afraid of the bogeyman.

Former_MSE_Forum_Manager

At this point I feel I should add a comment.

This board, in the time that I have been reading threads on it, contains some very passionate people who clearly have a love of what they are commenting on. This site makes it clear that nothing said by any user in any thread should be taken as advice (indeed, Martin himself encourages people to do their own research in addition to the information he provides on this site). Thus, I hope this board does not turn into a slanging arena because people have differing views.

The best way this forum can function is if people present their views as facts. Im certain that this industry is based around opinion and experience, so it is natural that there are going to be contrasting views. However, we encourage discussion and have no problem with differing views; but please be nice to other moneysavers.

worried_and_confused

MSE_Forum_Manager wrote:

The best way this forum can function is if people present their views as facts.

I'm not sure if I understand - if it's a view, it should be presented as a view, surely? To present a view as a fact could potentially cause great confusion, as the 'facts' will inevitably conflict!

whiteflag_3

The best way this forum can function is if people present their views as facts

.

I dont understand this either. The problem with this board is so many peolple
present their veiws as facts but then cannot back them up with any evidence.

Surely it should be the reverse, everyones posts should be treated as the posters view which then others can do their own research to see if they agree. What people get passionate about is when people post "facts" that are incorrect and they feel the less knowledgeable may act on them.

For example, a few weeks ago a in a reply to post on Inheritance tax someone advised the poster that there is Inheritance tax between spouses( not true). Even when challenged they still argued. Its when people post their views as "facts" that problems start.

michaels

whiteflag wrote:

Ah I see, your not comparing apples with apples. I thought you were talking about wrappers in your original post when you were talking cash ISAs and equity related funds.


Why not invest in pension in a cash fund. Surely the same risk as a cash ISA but you get the tax relief.

Back to the first subject of this thread.

Isn't the current tax treatment of income generated by isa's more favourable than that genereated within pensions - something to do with the chancellor's raid on pension funds in his first budget.

Also obviously the whole of an isa can be taken as a 'tax free lump sum' at any time rather than 25% at 55 (/60/...) And indeed the funds are available at any time for any purpose (some might see this as a disadvantage)

Against this is the risk that the isa benefit might be withdrawn at some future date - if this were to happen could the benfits of any isas then be paid into a pension scheme?

Also against this is that:
A) For higher rate taxpayers having a pension may shift income from the high rate tax bracket to the standard rate (assuming things stay similar to the way they are)
b) Pension contributions from gross salary are by definition larger so if a decent return can be earned, the 'pot' on which this return is being earned will be larger (a benefit from deferring the tax payment rather than the benefit in (a) of a possible lower tax payment)

Is this a fair summing up of the pros and cons or are there other factors to be considered?

Thanks

dunstonh

Discussion of opinions and views is great. Thats what makes many of our discussions here such good reading most of the time. However, as has been said, sometimes views and opinons are posted as fact which can be very misleading to those who are not financially aware (which is the bulk of the contributers asking questions).

We have had comments telling people to surrender their endowment (without a proper policy review taking place), to do SIPPs or drawdown without any mention of the negatives on these, to do Cash ISAs instead of pensions (or other savings/investment products). Often the people starting the topic then go on to thank that sort of response and say "thank you for the advice".

No-one is trying to prevent discussion. I think its fair to see we all want discussion. Its the presentation of the opinion as fact and when it could be taken as advice that is the main concern.

Back to the first subject of this thread.

Isn't the current tax treatment of income generated by isa's more favourable than that genereated within pensions - something to do with the chancellor's raid on pension funds in his first budget.

No. ISAs suffered the same fate. Also, ISAs are subject to IHT. Pensions are not.

Pension contributions can also increase the amount of working/childrens tax credits but ISA contributions cannot.

Also obviously the whole of an isa can be taken as a 'tax free lump sum' at any time rather than 25% at 55 (/60/...) And indeed the funds are available at any time for any purpose (some might see this as a disadvantage)

Advantage is flexibility but then some need that tie in to protect them so its not an absolute positive or negative issue.

Having to buy an annuity is a negative point as far as flexibility and the ability to pass the money on with your estate. However, annuities are extremely safe and currently provide a higher income than can be achieved on savings accounts.

We are really crying out for a new pension product that doesnt involve an annuity. One that has a tie in, gets tax relief but also allows you to move your final lump sum around to get better rates/returns and also can be passed on when you die.

worried_and_confused

dunstonh wrote:

Discussion of opinions and views is great. Thats what makes many of our discussions here such good reading most of the time. However, as has been said, sometimes views and opinons are posted as fact which can be very misleading to those who are not financially aware (which is the bulk of the contributers asking questions).

We have had comments telling people to surrender their endowment (without a proper policy review taking place), to do SIPPs or drawdown without any mention of the negatives on these, to do Cash ISAs instead of pensions (or other savings/investment products). Often the people starting the topic then go on to thank that sort of response and say "thank you for the advice".

No-one is trying to prevent discussion. I think its fair to see we all want discussion. Its the presentation of the opinion as fact and when it could be taken as advice that is the main concern.

dunstonh has it absolutely right, as usual. Keep up the good discussion!