additional pension on top of final salary pension

PurplePixie75

I am in the fortunate position of being a member of a final salary pension provided by my employer. I have spare cash which I would like to save for my retirement, but im unsure if I would be better off saving in a s&s isa or opening a pension. I plan to save approx £100 p/m for the next 30yrs. I am a basic rate tax payer. Any advice greatly appreciated

edinburgher

Hi Pixie

I take it there's no way to make additional payments into your employer's scheme? For example, I'm in the Nuvos scheme for civil servants and can buy extra pension at an agreed rate which is probably more generous than I'd get for the same amount invested in an annuity.

PurplePixie75

edinburgher wrote: »

Hi Pixie

I take it there's no way to make additional payments into your employer's scheme? For example, I'm in the Nuvos scheme for civil servants and can buy extra pension at an agreed rate which is probably more generous than I'd get for the same amount invested in an annuity.

no, its a non-contributory pension. Its completely funded by the employer, no option for the employee to contribute.

edinburgher

You'll probably want to look at the stickied thread discussing the relative benefits of pensions vs ISAs then, as they both have their merits.

If there's no added benefit/contribution to come from your employer I'd personally opt to invest the money in ISAs, but I freely admit to being interested in investing and being a bit of a control freak

kidmugsy

The great thing with ISAs is that they effectively freeze your income tax rate. That is, you've paid your 20% tax on the money before you put it in, and you pay 0% when you take it out. With a pension you'll pay whatever is your then rate of tax when you receive the money (apart from the tax free lump sum, if it still exists). So if you expect income tax rates, as they apply to you, to increase over the next decades, you might incline to an ISA; if you expect them to decrease, to a pension.

Loughton_Monkey

kidmugsy wrote: »

The great thing with ISAs is that they effectively freeze your income tax rate. That is, you've paid your 20% tax on the money before you put it in, and you pay 0% when you take it out. With a pension you'll pay whatever is your then rate of tax when you receive the money (apart from the tax free lump sum, if it still exists). So if you expect income tax rates, as they apply to you, to increase over the next decades, you might incline to an ISA; if you expect them to decrease, to a pension.

Well actually, if tax rates stay at 20%, then technically pension has the 'edge' - by producing 6.25% more money at retirement. However, there are 'limitations' on how you can draw it - which to some extent sways people away from using them.

But remember that you would qualify for 'Flexible' drawdown (probably) and that takes away a lot of the restrictions.

However, with a good Final Salary scheme, it is legitimate to use ISA's.