pay into old pension or ISA

smithers1

Hi all,

Would really appreciate any help.

I have an old pension from a previous job with a few thousand in. They charge £1.50 a month. I'm not currently paying into this, but instead i set up an ISA which i am paying into.

Having looked at advice, without my employer contributing ISA's seem a better option, but seen as i already have a pesion, which is charging me, would i be better off paying into that?

Hope this makes sense! Any help most appreciated.

Smithers

DavidLaGuardia

Firstly a pension may be moved to another that will not charge £1.50 a month. Providing you have no penalty applied on swirching Stakeholders may be a suitable alternativefor a small fund as there is no upfront fee and just a fund charge which many providers keep to 1%

For future contributions An ISA has the advantage of being accesible
Whereas a pension has the advantage of tax relief and protection from creditors, It disdadvantage is no access until age 55 when a quarter is availble as a tax free lump sum and the reminader must be used to generate an income that is taxable at your marginal rate in retirement

DiggerUK

Smithers,
Stick with the ISA, far more flexible and accessible.
If your pension is invested wrong, you cannot pull out till you are 55, you are stuck with it.

ka71

DiggerUK wrote: »

If your pension is invested wrong, you cannot pull out till you are 55, you are stuck with it.

You can switch your investments though, or move to another provider.

Annisele

DiggerUK wrote: »

Smithers,
Stick with the ISA, far more flexible and accessible.
If your pension is invested wrong, you cannot pull out till you are 55, you are stuck with it.

I think the above is a bit too black and white for most people.

There are circumstances where I might say that an ISA was better than a pension, but from the very little we know about the OP I don't think it's fair to say that an ISA must definitely be better.

For most people, there's benefit in using both ISAs and pensions for their financial planning.

The Financial Services Authority publishes some basic information about pensions: http://www.moneymadeclear.fsa.gov.uk/products/pensions/pensions.html.

One thing to note is that you get tax relief on pension contributions. Effectively the government gives you free money, but in exchange there are restrictions on what you can do with the savings/investments you build up.

As others have said, you will probably be able to switch your existing fund to somewhere that doesn't have a monthly charge.

dunstonh

Why are they are the only two options; ISA or old pension?

You have new pension, cash ISA and stocks and shares ISA and the old pension. If you are married then you may also include your spouse as well to balance your provision.

Having looked at advice, without my employer contributing ISA's seem a better option, but seen as i already have a pesion, which is charging me, would i be better off paying into that?

Do you mean you have sought advice on your personal circumstances? In which case they know more about you than we do and ISA may be best. However, if you have read an article on the web then that is not advice and will be generic. It may be right for you but it may be wrong. The ISA vs pensions thread at the top highlights the pros and cons but you can never say ISA is better than pension (or vice versa) without knowing the facts of the individual.

jamesd

smithers1 wrote: »

I have an old pension from a previous job with a few thousand in. They charge £1.50 a month.

Does the pension have bonuses like guaranteed annuity rates attached to it? Those are typically far higher than current annuity rats and could make it worth keeping this pension. You need to have an IFA look at the specific terms of this pension to see whether it's worth keeping it or not. If not, you can transfer it elsewhere that may be cheaper. Or not, the £1.50 a month may save you money in fund management charges.

smithers1 wrote: »

Having looked at advice, without my employer contributing ISA's seem a better option

Pensions are the best option for generating income in retirement, paying at least 8% more than an ISA if identical options for investment and income are used in both.

This is assuming use of stocks and shares ISA investing. Cash ISAs are pointless for long term pension investing because the returns they offer are far lower than investments. You'd be quite likely to end up having to pay in twice as much to get the same pension income if you tried using a cash ISA.

smithers1

Thank you for your responses everyone. Still scratching my head but appreciate your help!

Just to try and answer some confusion, yes i am talking about stocks and share isas, when i said i have looked at advice i didnt mean any good and proper advice (which is probably what i need to get!) and yes, i can transfer my pension to another if i want to - but have no idea what makes one pension better than another!