Savings vs pension

therapist

Hi
I have approx £500 per month disposable income and a small pension. Should I invest this in savings (ISAs etc) or a pension plan? I have approx 8 years before retirement.
Thanks

dunstonh

Should I invest this in savings (ISAs etc) or a pension plan?

Which options meet your objectives in the best way?

smartsaver

We have the same dilema and I suppose the objective is to have as much money as possible at retirement - which I know is not an exact science and depends on attitude to risk amongst other things.

Obvious to some but not all is the fact you have to transfer most ISA's into a new account each year or end of promo interest rate to get a better rate of interest - after the promo rate ends the interest falls away to nothing.

I think a bit of both is the way forward for us so not all money is in one place but would welcome any thoughts.

jamesd

A cash ISA is unsuitable for this. It doesn't offer sufficient returns compared to the investment options available in a pension or stocks and shares ISA.

For more comment and thoughts see ISAs v Pensions.

Loughton_Monkey

There are two distinct issues here:

Saving for retirement -

1. Investment or Savings? As long as we are talking about longer term retirement planning (5 years absolute minimum but certainly 10 years+) then it is wise only to think in terms of 'investment'. Otherwise savings will tend not to keep up with inflation, and will actually erode the value over time.

2. Pension or Stocks & Shares ISA? Both are legitimate vehicles for retirement planning and given the similarity in funds these days, investment returns are virtually identical under either wrapper. So important to look at the different aspect of tax relief and how each type of investment can be 'taken'. There are distinct pro's and con's. True answer for most people is often mainly pension with some ISA as well.

therapist

Thanks for the comments. I already have a sum in cash ISAs (and switch each year), but I don't have a clue about stocks and shares ISAs. Idealy, I would like to invest some of my savings in a s&s ISA, but wouldn't know where or how to invest. Given this, where or how can I invest my s&s allowance - i.e., the most economical way of saying to someone: "here is a sum of money, take care of my s&s ISA"?

nrsql

A lot depends on your attitude to risk.
A pension would be considered in general a higher risk wrapper than an isa (imho) - but a lot of that risk is due to not being able to access the funds. For you that might actually be considered a lowering of the risk in some respects. You need to decide if any tax advantages in your situation justify the risk.

You don't have to take a single product with the money. Over could splt it into thirds - cash isa, s&s isa, pension. You also don't have to continue with the same split for the whole 8 years.