ISAs v Pensions: The Official Retirement Debate

Running_man

Could I also ask you a question
On one of your earlier posts you state ISAs are not suitable retiremnet vehicles as they are no good for long time planning
Why is this? Arent we guaranteed to have ISAs to 2010?Then if they dont carry on surely there will be something to replace them as a tax free saving (didnt ISAs replace Tessas?)

New to these forums but irate over pension after paying into one for over 25 years now will not be getting much out of it

EdInvestor

Money in a personal pension (inc stakeholder and SIPP) is just the same as money in the bank.

It's not of course, because you cannot get the money out.You have lost control of the capital

Investment (stock and shares/equity) ISAs are very suitable tax wrappers for long-term retirement investment. Total 7k a year can go in, capital and income is tax free on exit ( unlike pensions).

Don't confuse them with cash ISAs, only 3k can go in.

jem16

Running_man wrote:

Could I also ask you a question
On one of your earlier posts you state ISAs are not suitable retiremnet vehicles as they are no good for long time planning

Cash ISAs are not suitable for long term planning. Equity ISAs are suitable.

Basically your cash ISA doesn't provide much growth and barely keeps ahead of inflation.

Arent we guaranteed to have ISAs to 2010?

The present government has confirmed that ISAs will continue after 2010. There is obvioulsy no guarantee what future governments will do though.

New to these forums but irate over pension after paying into one for over 25 years now will not be getting much out of it

Why not? This may have nothing to do with the pension, which is just a wrapper, but more to do with what it's invested in.

What is your pension? Post some details and I'm sure someone could help.

dunstonh

So in a pension you can access your money at all times?

No. However, you are in control of where it is invested. That was what I meant. Accessibility doesnt exist on many products. However, control and accessbility are two different things.

Pension funds/endowment providers had it good for over 20 years couple bad years no money left.
Over time financial markets always been boom and bust so therefore would it not have been sensible to put some money aside during the good years.
People trusted providers paid every month of their working lives to see nothing left.THATS WRONG.

Your solution there is actually the cause of a lot of the problems on the endowment front. The smoothed option failed due to a combination of poor management (letting marketing men set the rates and not the accountants/acturies), increased tax burden, increased solvency requirements and the move to a stable low inflation economy (the old strategies were built on boom/bust).

Direct holdings in unit linked funds are the better option as you dont have to worry about the bulk of those things and you can switch things around with a couple of clicks of the mouse.

think you will find with all the pension schemes folded altered etc it is alot more than 75000 people affected BUt using your figure

75000 who have dependants say partner and one child.Know some will have more some less.But already up to 225000 people affected makes a mockery of your original total

I have seen figures quoted at 50,000 and 100,000. BBC currently have it at 85,000 http://news.bbc.co.uk/1/hi/business/6378659.stm

Do you think its right for people who have worked all their lives to lose money ?

No. However, you have stated that you dont trust pensions. That is what I disagree with. The term pension covers a wide range of options. Many of which have little in common with each other apart from being used to provide an income in retirement. You dont stop eating everything because you dont like sprouts.

On one of your earlier posts you state ISAs are not suitable retiremnet vehicles as they are no good for long time planning
Why is this? Arent we guaranteed to have ISAs to 2010?Then if they dont carry on surely there will be something to replace them as a tax free saving (didnt ISAs replace Tessas?)

I did not say ISAs are not suitable. I said Cash ISAs are not suitable. S&S ISAs are very suitable. More often than not the most suitable. However, cash historically does not keep up with inflation. Cash ISAs are closer to inflation at this time but anything you put in cash ISAs is really only maintaining its real value. It isnt getting any real growth.

ISAs are no longer guaranteed until 2010. They will be around until a future chancellor abolishes them. There is no guarantee future options will be better. PEPs were better than ISAs. You could invest more and they were truely tax free, ISAs are not.

Paul_Herring

Running_man wrote:

So in a pension you can access your money at all times?

No. You cannot use the funds until you're 50/55, and even then (unless you use drawdown) you must buy an annuity with it.

If you want 'access' to your money you should be using an ISA, not a pension fund

Paul_Herring

Running_man wrote:

Could I also ask you a question
On one of your earlier posts you state ISAs are not suitable retiremnet vehicles as they are no good for long time planning
Why is this? Arent we guaranteed to have ISAs to 2010?Then if they dont carry on surely there will be something to replace them as a tax free saving (didnt ISAs replace Tessas?)

There are two sorts of ISAs. Cash ISAs and Investment ISAs. Cash ISAs are not suitable for retirement/long term planning, Investment ISAs are.

tyllwyd

I was reading The Mirror yesterday, and I noticed this from Your Money Editor John Husband's column:

"Question: I was thinking of starting a pension but my friend says ISAs are a better way to save. What do you think?

Answer: Because you can cash them in whenever you wish, ISAs are more flexible. But the tax benefits of a pension are far greater. You get tax relief on your contributions, the money invested grows largely free of tax, and you can take a quarter of the benefits as a tax free lump sum when you retire."

cheerfulcat

Who takes their investment advice from a tabloid journalist? If you want proper, informed, intelligent comment read this from TMF.

Paul_Herring

tyllwyd wrote:

Answer: Because you can cash them in whenever you wish, ISAs are more flexible. But the tax benefits of a pension are far greater. You get tax relief on your contributions, the money invested grows largely free of tax, and you can take a quarter of the benefits as a tax free lump sum when you retire."

Well they aren't technically wrong. They just didn't explicitly point out that the other 75% is taxed - and the tax rate in retirement will probably be the same as the relief on the money going in.

The 25% TFC (if it will still exist when you retire) is one reason why you may want to cash in your investment ISA's and put it in the pension near retirement.

cheerfulcat

Paul_Herring wrote:

The 25% TFC (if it will still exist when you retire) is one reason why you may want to cash in your investment ISA's and put it in the pension near retirement.

Get 25% of your money back and lose control of the other 75%...