Pensions Versus Savings

deemy2004

oceanblue wrote:

Ed, how do you see people in retirement using ISA's to supplement their State Pensions? What would you judge to be the main advantages and disadvantages?

The main advantage is flexibility !

Pensions are completely inflexible !

After someone has worked all their lives, they don't want to be treated like babies in their retirement, especially if they have accrued additional ISA savings.

I say 2 for 1 - for every £ put into an pension - put £2 into an ISA !

EdInvestor

Nick_C wrote:

Not true. I receive tax relief at 40%, and depending on future changes, will pay tax at 22%, on a bigger personal allowance.

You assume this Nick.But it's a risk isn't it? You have no way of knowing what basic rate tax will be when you retire.It wasn't that long ago that it was much higher than 22%.

dunstonh

After someone has worked all their lives, they don't want to be treated like babies in their retirement, especially if they have accrued additional ISA savings.

And your experience of what retired people want is?

I would say, based on my experience, that generally, apart from the wealthy, most want a stable regular income month after month.

An annuity has its negative points but given the safety of those payments which are guaranteed for life and higher than savings accounts, it is certainly appropriate for consideration.

I say 2 for 1 - for every £ put into an pension - put £2 into an ISA !

Would your "advice" change if there were childrens/working tax credits to consider? would it change if they were a higher rate tax payer? would your advice change if they had other savings/investments? would your advice change if they were terminally ill? would your advice change if the person is already retired?

margaretclare

Ed, how do you see people in retirement using ISA's to supplement their State Pensions? What would you judge to be the main advantages and disadvantages?

As a retiree, if I can stick an oar in - can I just say this. Saving £3K a year in a cash ISA, I'd have had to do this over many years if I wanted to take the interest from it as income. I'd have to have a lot, in other words, otherwise the interest wouldn't amount to much of an income.

I think I'd be better with Granny Bonds, if that was the way I was thinking.

Aunty Margaret

oceanblue_3

EdInvestor wrote:

You assume this Nick. But it's a risk isn't it? You have no way of knowing what basic rate tax will be when you retire. It wasn't that long ago that it was much higher than 22%.

It's also important to remember that ISA's might not be around forever. When this government introduced them in 1999 it stated that they would run until at least 2009, although it has only committed to the current contribution levels until April 2006, so these may change before 2009.

deemy2004

oceanblue wrote:

It's also important to remember that ISA's might not be around forever. When this government introduced them in 1999 it stated that they would run until at least 2009, although it has only committed to the current contribution levels until April 2006, so these may change before 2009.

Sorry but your a bit out of date there.... ISA's extended to 2010

And probably will be extended further by another term, maybe in 2009, unless they introduce another tax free savigns product, which i doubt.

deemy2004

dunstonh wrote:

And your experience of what retired people want is?

I would say, based on my experience, that generally, apart from the wealthy, most want a stable regular income month after month.

An annuity has its negative points but given the safety of those payments which are guaranteed for life and higher than savings accounts, it is certainly appropriate for consideration.



Would your "advice" change if there were childrens/working tax credits to consider? would it change if they were a higher rate tax payer? would your advice change if they had other savings/investments? would your advice change if they were terminally ill? would your advice change if the person is already retired?

People do come to me for advice - free I might add

give me a scenerio then I will give you free advice

Low income ? WTC ? My advice is your wasting your money in a pension put it INTO a cash ISA !!!!

oceanblue_3

deemy2004 wrote:

Sorry but your a bit out of date there.... ISA's extended to 2010

And probably will be extended further by another term, maybe in 2009, unless they introduce another tax free savigns product, which i doubt.

Yes, but for contributions beyond 5 April 2010 to be allowed, the Finance Act relating to the Budget in March 2009 (or an earlier one) would have to permit them. Thus, changes would have to be made BEFORE the end of the tax year ending 5 April 2009.

Deemy, I'm not looking to disagree with your reasoning here; I was simply pointing out that if, as Edinvestor asserts, you cannot predict tax bands, then neither can you rely upon the existence of investment products. If you remember, this government was looking to reduce the Stocks and Shares ISA allowance to £5,000.00 not so long ago. Furthermore, HMRC continues to voice concern over the level of fraud in respect of "over-investment" by some.

isasmurf

A review of ISAs beyond 2010 must take place next year (a review by 2006 was promised when ISAs were launched), so I think we can expect something to be announced before 2009.

And technically the Government wasn't looking to reduce the S&S rate to £5,000. That is the level it was always intended to be from day 1. The government perhaps shot themselves in the foot, by introducing the £7,000 for the first year of ISAs, then extending it to the second year, and then extending it to 2006.

cheerfulcat

oceanblue wrote:

Furthermore, HMRC continues to voice concern over the level of fraud in respect of "over-investment" by some.

oceanblue, would you have any links on this? Because I spy an excuse to take the axe to ISAs...