Getting money out of pension

fairenoughclough

MarkGalvin wrote:

I still have 25 years working to provide an income for my family. I need the money now and if it allows me to hang on to my house then it is not a trivial matter.

Life changes and pensions don't understand that. It is a fixed and inflexible product and not suited to life as it is nowadays.

Commiserations Mark, hope you find a way out soon.

I think that by the time you get to retirement they'll have changed the rules and you will have an extra five years to work to fund pensions for the politicians and senior civil servants to continue to live in luxury.

Whilst those of us who have managed to put a bit way for retirement are shafted by means-tested state pension provision.

EdInvestor

Hi dunstonh

<i>You forget the effect of having 22% tax relief on the investment performance. The pension fund will always be higher than the ISA due to the tax relief when assuming the same investment fund(s). </i>


#The pension fund will be larger at retirement than the ISA because of the extra 22% going in with the contributions.But, except for the tax free cash, this extra money disappears because of the tax levied on the income paid on the way out.

You don't of course pay any tax at all on the proceeds of an ISA.

Will ISAs be with us forever? ISAs were preceded by PEPs which started IIRC in around 1998. So they have a 17 year history already and Brown has said they will continue another 5 years until 2010. They seem to be growing legs

What about pensions?

Next year all the pension rules will change, mostly IMHO for the better. At the moment, the rules say you can contribute X amount per year to a pension based on your earnings. If you don't make the contribution, you miss the tax free chunk on that bit of your earnings forever.

But the new rules are based on a "lifetime limit" of (wait for it) 1.5m quid, that's how much you can put in and get tax relief on it.:eek:

And you can put up to c.200k into your pension a year.Blimey.

For most people I think that means they can basically ignore pensions completely until they are middleaged ( saving in ISAs, buying a house, etc in the meantime ) and then pile loads of cash ( possibly from their ISAs) into the pension as they get closer to retirement.

In the meantime IMHO the cheap online SIPP ( or the stakeholder) is the way to go for all the bits and pieces of pensions people have dotted about from their various old jobs, many of which are attracting very high charges.(With older pensions ( pre 1988) in WP funds, do watch out for valuable annuity guarantees on the policy though as it may be unwise to move).

dunstonh

Is there such a thing as an ISA pension (if that makes sense anyway), how would you best use a combination of an ISA and pension?

Pensions and ISAs invest in the same place so there is no difference there. So an ISA pension wouldnt make any sense.

A pension is just a tax wrapper in the same way an ISA is a tax wrapper. The underlying investments can be the same or very similar.

The only difference is the taxation and the way the maturity proceeds are paid.

isasmurf

krazyk wrote:

Is there such a thing as an ISA pension (if that makes sense anyway), how would you best use a combination of an ISA and pension?

There used to be (still is?) something called an Individual Pensions Account (IPA) that was supposed to operate similar to an ISA or PEP. I don't know anything more about them than that, or what happened to them?

EdInvestor

IPAs were never activated.I suspect they got overtaken by the cheap new online SIPPs.These are much closer to an ISA in concept than an ordinary personal pension because you can invest directly into stocks and shares (and gilts/corporate bonds) whereas ordinary PPs are limited to funds.

One other thing about a SIPP is that the investment side and the pension admin side are usually split, so after you set it up, you're basically dealing just with the investment side of things. The pension admin kind of hums away in the background, more or less invisibly, like an ISA.Whereas with the lifeco type PP the pension admin seems to dominate the investment, which is the wrong way round IMHO.

Also SIPP users say the admin is much more efficient than most life companies and that's certainly my experience as well.

Murtle

Editor wrote:

What about pensions?
***
But the new rules are based on a "lifetime limit" of (wait for it) 1.5m quid, that's how much you can put in and get tax relief on it.:eek:

And you can put up to c.200k into your pension a year.Blimey.

Yes please, next question - where do I get that sort of money from :rolleyes: