ISA or Pension scheme?

neatheyc

Hi all,

Advice needed please. I need to setup some sort of saving scheme for a pension. Is it better to go with a pension company such as Prudential or just save a certain amount in an ISA account myself?

Also, if I have an ISA account, can I still withdraw money from it on a daily basis?

Thanks for your help.

Christian

jem16

neatheyc wrote:

Hi all,

Advice needed please. I need to setup some sort of saving scheme for a pension. Is it better to go with a pension company such as Prudential or just save a certain amount in an ISA account myself?

If you are a basic rate taxpayer and there is no contribution from an employer, then an ISA is probably better. However it must be a stocks & shares ISA and not simply a cash ISA.

Also, if I have an ISA account, can I still withdraw money from it on a daily basis?

If it was a cash ISA you can withdraw money easily on a dialy basis. Not entirely sure how long it takes to withdraw money from a S&S ISA. However why would you want to withdraw daily if it was for your pension?

dunstonh

There are pros and cons with both options. The ISA is generally better nowadays than the pension. However, you should still use the pension to build up a lump for yourself (and spouse/partner) to fully utilise your personal allowance in retirement. Once your pension planning is to that level and perhaps the lower rate tax band, then you should be looking at ISAs instead of pensions.

As Jem says, ISA means stocks and shares in this case and not cash. Cash ISAs are not really suitable for long term events like retirement planning.

There are other exceptions which can make pensions better. Higher rate tax relief, increased working/children's tax credits which could result in as much as 72% relief effectively on a pension and death benefits being higher before retirement to name a few.

Is it better to go with a pension company such as Prudential

Pru are not exactly a pension company. They are not that active on the individual pension front and haven't been for some time. Their offering is quite weak compared to others and I wouldn't consider their product.

Indeed, at this moment, there isnt exactly a lot that Pru have to offer in any area.

neatheyc

Hi guys,

Thanks for your replies. You can tell that I do not have a clue on these kind of things.

To be clearer on my situation. I worked for a big company for about 10 years and had a pension scheme with them. I think I accumilated about £25,000 or so. But was made redundant from them in November. My new company does not contribute to pensions at the moment. Although they're looking to do this this year some time.

I am in the lower tax band. I owe my girlfriend about £4000 and have that in my account. But was going to use it to open an ISA or something, leave it until she wants me to pay her back and then withdraw it (hence the withdraw question).

I am looking to pay in around £250 a month for my pension. I have no idea what the difference is between a stock and shares or a cash ISA! So will look into that.

Cheers.

dunstonh

It is unlikely you are in the lower rate tax band as that would give you earnings of under £7185. I am going to assume you mean basic rate tax band.

Basic rate taxpayers are usually better looking at ISAs once their pension fund has built up enough to give them an income in excess of £9430 in retirement in todays terms (including state pensions). You already have some in a pension and that could be enough depending on your age to meet that requirement. Especially if your employer is going to start a funded pension scheme shortly (probably doing it now before they are forced to in 2012 when all employees will be opted in to the NPSS).

I am looking to pay in around £250 a month for my pension. I have no idea what the difference is between a stock and shares or a cash ISA! So will look into that.

A big difference. You are investing money for the long term and cash ISAs only just beat inflation currently. This means you are not getting any real growth on your money. Stocks and shares ISAs (as do pensions) allow you to invest in a much wider range of areas with greater potential for growth.

You should also be looking at this old pension. If that is with Pru, then you really need that reviewed as chances are its in a poor quality investment fund which is now basically obsolete. A pension is just a wrapper. It doesnt make or lose anything. Its what is inside the wrapper that matters and that is the investment funds. Too many people are invested in old fashioned funds in an obsolete manner (single fund investing for example). A switch out of these old funds into a modern range is often free of charge but can turn a poor performing pension into one with great investment potential. If your pension hasnt gone up by at least 60% in the last 5 years, then it isnt invested correctly and needs changing.

Take this £25k you have seriously. I bet you would if it was in your bank account. Having it in the pension wrapper is no different.

neatheyc

Great. Thanks for the advice Dunstonh. I am a basic rate tax payer. Can't remember who my pension was with but will check this out and check what options I have to do with the 25k.

How do I go about getting a stock and shares ISA? Do you know which companies provide them?

dunstonh

How do I go about getting a stock and shares ISA? Do you know which companies provide them?

Over 100 companies provide unit trust ISAs and the fund range is around 6000. Usually a fund supermarket is the best option and for DIY investors, the pointer is usually towards hargreaves lansdown.

Bisoy

Hi guys,

I hope you don't mind me joining your discussion. I am in a similar position and unsure if I have done the right decision.

I am a naturalised British citizen and working in the NHS. I opted not to join the pension scheme for the simple reason that I am not planning to retire in this country. As my own understanding of the pension scheme that I could not received my pension unless I am age 50 the earliest ( correct me if I'm wrong ).

Hence I am using my full ISA allowance each year for the future which I considered as my own pension. I knew that this is not very efficient for saving or investing for the future.

Can anyone have any better ideas of investing which involves no or little risk and which I can access my money when I'll need it aside from cash ISA's?

Any response greatly appreciated.

dunstonh

Hence I am using my full ISA allowance each year for the future which I considered as my own pension. I knew that this is not very efficient for saving or investing for the future.

I suggest you go to the cashpoint each month, withdraw 10% of your earnings and set fire to it. That is basically what you are doing by not joining the NHS scheme.

dunstonh

If you don't have something constructive to say, shut your big MOUTH.:mad:

Your post is a disgrace and I suggest you retract it as it is totally inappropriate. Most of it doesnt make any sense and I cannot see what drink and smoking has to do with it.

I fail to see why you have responded in that manner to a perfectly decent answer.

Bisoy

dunstonh wrote:

Your post is a disgrace and I suggest you retract it as it is totally inappropriate. Most of it doesnt make any sense and I cannot see what drink and smoking has to do with it.

I fail to see why you have responded in that manner to a perfectly decent answer.

If the moderator feels my reply was inappropriate then I am quite happy for it to be deleted.

If you have read my original post # 8 I was politely seeking any tips or advise.That's the tone of my message and then here comes someone try to "suggest" who he thinks is a decent reply to my post.

It was a genuine query and hoping that someone who are having similar experience or expert in their field would share their knowledge.