alternative to pension saving

squid

i have had a stakeholder pension for 4years and although i began by paying £70 per month in to it as advised, after a short time this was reduced to £20 due to change of job and now have a mortgage. I am aware i should be paying around £100 per month in to it now (im almost 34)

however, an ex manager of mine (aprox 50) advised me that instead of a pension plan she has been paying in to for years, a savings account in her daughters name which is to be for her retirement, to avoid being taxed on a monthly salary. She said by opening an account in a childs name that this is a loop hole.

is this a good idea?

dunstonh

is this a good idea?

No.

Daughter could run off with the money (at a later date) and a savings account is woefully inadequate as a long term investment.

Equity ISAs are the most appropriate alternative to a pension.

richgirl

squid wrote:

i have had a stakeholder pension for 4years and although i began by paying £70 per month in to it as advised, after a short time this was reduced to £20 due to change of job and now have a mortgage. I am aware i should be paying around £100 per month in to it now (im almost 34)

however, an ex manager of mine (aprox 50) advised me that instead of a pension plan she has been paying in to for years, a savings account in her daughters name which is to be for her retirement, to avoid being taxed on a monthly salary. She said by opening an account in a childs name that this is a loop hole.

is this a good idea?

A child is only allowed to earn £100 a year interest from money deposited by each parent, if they earn more then the whole amount is taxable !

Your friend has made a big mistake !

The real alternative would be the cash isa's since they are tax free.

dunstonh

cash ISAs, although better, are still not an ideal product for long term investing.

Xbigman

And at some point the child grows up and will use their tax free allowance themselves, where does the money go then?
Regards



X

kenshaz

That is not a loophole it is fraud

thor

dunstonh wrote:

No.


Equity ISAs are the most appropriate alternative to a pension.

You are gambling on stocks & shares to increase over the long term which it has done up to now. But remember that past history is no guide to the future, just because the shares have risen over the past 50 years does not mean that they will over the next 50. With the way that the environment is going and the increasing scarcity of oil I really doubt that companies will be making so much profit in the near and distant future.

dunstonh

thor wrote:

You are gambling on stocks & shares to increase over the long term which it has done up to now. But remember that past history is no guide to the future, just because the shares have risen over the past 50 years does not mean that they will over the next 50. With the way that the environment is going and the increasing scarcity of oil I really doubt that companies will be making so much profit in the near and distant future.

Which has nothing to do with equity ISAs vs pensions. The tax wrapper does not make or lose money and neither tax wrapper needs to invest in stocks and shares if you dont want it to.

Paul_Herring

dunstonh wrote:

Which has nothing to do with equity ISAs vs pensions. The tax wrapper does not make or lose money and neither tax wrapper needs to invest in stocks and shares if you dont want it to.

To be fair to thor, you did quote equity ISA's which are generally considered to be stocks and shares

(yes I realise you're addressing the perception that 'investing in a pension' is sometimes seen to the uninitated as nothing to do with stocks and shares)

cheerfulcat

thor wrote:

With the way that the environment is going and the increasing scarcity of oil I really doubt that companies will be making so much profit in the near and distant future.

What about the companies making fuel cells and solar panels and parts for windmills? Desalination equipment and wave power buoys? Aerospace engineering? Miners? The banks who provide the money? I see nothing but profit...

dunstonh

To be fair to thor, you did quote equity ISA's which are generally considered to be stocks and shares

True but you dont have to invest in stocks and shares with equity ISAs (or pensions) which was the main point. They should have called them investment ISAs.