ISAs v Pensions: The Official Retirement Debate

jem16

Izzy_Skint wrote: »

My scheme is a final salary/two thirds pension, am I risking losing my age-related allowance if I were to start paying into an AVC now (I have 23 years of work left, fingers crossed).

That depends on what you will get from your final salary pension. You also have to take the state pension into account.

Also, can someone clarify. If I were to take out an AVC now to suppliment my company pension, would my AVC also give me a guaranteed income for life as well as my company pension scheme?

Yes it would if you chose an annuity. You could also use income drawdown although it's more risky as your funds stay invested.

And if this were so could I therefore glean much more from my avc provider than I put in if I lived to be, say 100 (fingers crossed again)

Have you got your date of death handy?

I suppose the answer is that you could.

ffacoffipawb

jem16 wrote: »

You have to remember though that the government may do away with the 25% tax-free cash option.

Unlikely since it is in most scheme rules, especially the unionised public sector.

And those with pension mortgages where the PCLS is targeted to pay off the mortgage would have an instant shortfall with no chance of making it up.

Given how unpopular this shower we have in power until 2010 at the latest are, they wouldn't dare.

I wouldn't be surprised if it was abolished, for future service only, at some point. But administering that on a money purchase scheme would be a nightmare.

sdooley

When you are young the best option is ISAs (if you can trust yourself not to spend them and the government not to change the rules).

When you have bought a house the best option is overpayment on the mortgage.

Once you have paid off the mortgage (typically in your late 40s at the earliest) and have 3 months cash reserve the best option is to max out the pension.

If you have to contribute to a pension to get an employer contribution, this is always worth doing.

Andy_L

sdooley wrote: »

When you are young the best option is ISAs (if you can trust yourself not to spend them and the government not to change the rules).

Unless you are a higher rate taxpayer or at a higher than usual risk of bankruptcy.

sdooley wrote: »

When you have bought a house the best option is overpayment on the mortgage.

Unless your mortgage rate is lower than your investment returns

sdooley wrote: »

Once you have paid off the mortgage (typically in your late 40s at the earliest) and have 3 months cash reserve the best option is to max out the pension.

unless you are a lower rate tax payer

sdooley wrote: »

If you have to contribute to a pension to get an employer contribution, this is always worth doing.

True.

dunstonh

Also worth noting that if you become ill later and are unable to work you could have problems if you chose ISA

1 - ISAs are included in benefits means test. Pensions are not
2 - pension contributions are available on your earned income. if you become ill and cease to earn then you may not be able to put more than £3600 into a pension. Y

ffacoffipawb

dunstonh wrote: »

Also worth noting that if you become ill later and are unable to work you could have problems if you chose ISA

1 - ISAs are included in benefits means test. Pensions are not
2 - pension contributions are available on your earned income. if you become ill and cease to earn then you may not be able to put more than £3600 into a pension. Y

Regarding Point 1. If you are over 50 (or 55 in a couple of years) and have a money purchase pension with, say £100,000 in it, could they force you to take the 25% tax free cash (and drawdown the rest, at whatever rate to fail any means test) so that you don't qualify for benefits - i.e. make a pension plan count for a benefits means test?

tiny_tim_4

This is my first time on here so please try and be nice .Myself and 2 partners run alittle company and pay ourselves about 50000 each before tax.We are trying to decide if we shoud take out a pension or another alternative.from other readers replies it seems to be that its best to spread your money around.if a pension is the order of the day have any of you any ideas/recomendations of what company to use. I am a beliver of having a second house instead of a pension, but I'm sure there are downsides of which i am not aware of.Any advice would be greatly appreciated:beer:

dunstonh

I am a beliver of having a second house instead of a pension

Is that because returns are typically less and you get taxed more on a second house?

if a pension is the order of the day have any of you any ideas/recomendations of what company to use.

It depends on how you want to invest the money and how you intend to purchase the pension. For example, some of the best personal pensions are not available direct to public but need an IFA. Some of the best DIY options are designed for the experienced investor where you need investment knowledge (mainly due to their higher cost if you only use them for simple investing).

Think of a pension and ISA as being the same thing. They have the same investment options virtually so the same concepts apply. It isnt the ISA or pension that make you money but the investments within it (which can include REITS, property shares and bricks and mortar funds if property really is your thing).

jamesd

Are you Steve Kember, one of the two people in the photograph on the site, or someone acting on his behalf?

ffacoffipawb

jamesd wrote: »

Are you Steve Kember, one of the two people in the photograph on the site, or someone acting on his behalf?

Nothing new on that website that I can see.