house as a pension

ard123en

hi All

at the mo at the age of 37 i dont have an offical pension my new employer has a stakeholder but ive not taken up ive been out of my last company scheme about 5 years

ive been using up my isa allowance instead £3k cash 4k shares

my girlfriend is selling her house and we are buying one together her house is in a good area near the city centre and uni

I just wondering it I could use the new A day rules to buy the house to let and have the tax man pay some of the mortgage (im a low rate taxpayer just good at budgets and saving)

If its possible

1 who would offically own the house ?

2 what would happen to it if I died ?

3 if nearer retirment i sold the house when would happen to the money would it have to be used to buy an annuity ?

Ard123en

ManAtHome

Residential property has been dropped from the A-Day changes.

ard123en

that rules that idea out then : )

need to make my mind up then carry on with a isa or take a stakeholder

the way i see it one is taxed money in but tax free out (isa)

the other is tax free in but taxed out (pension)

dunstonh

It wouldnt have worked how you wanted it, even on the old rules (which may only be taking a year off pending SIPP regulation coming in 2007).

Debt_Free_Chick

ard123en wrote:

that rules that idea out then : )

need to make my mind up then carry on with a isa or take a stakeholder

the way i see it one is taxed money in but tax free out (isa)

the other is tax free in but taxed out (pension)

That pretty much sums it up, but add these factors .....

25% of pension fund can be taken tax free (so not all is taxed on the way out)

You may be paying a lower rate of tax in retirement e.g. you could get 40% relief on contributions paid today and only then pay 22% on the pension income (from 75% of the fund, as you took 25% tax free).

Money put in a pension is tied up until retirement. Money in an ISA you can get at any time.

Money in a pension (or 75% of it) must be used to provide you with a regular income in retirement. Money in an ISA can be taken as a lump sum, to do whatever you like with it.

Pension is protected, should you ever file for bankruptcy - ISA money will be taken to pay off your debts

Finally - a pension is just that. Designed to give you an income in retirement (hence the restrictions). An ISA is a savings account, albeit with some tax breaks.

Anyone else ... any other pointers?

HTH

dunstonh

Death benefits (before commencement) are higher on a pension than an ISA.

The payout on death with pension (before commencement) do not form part of your estate for IHT purposes. An ISA would.

Pension contributions can increase working/childrens tax credits. ISAs do not.