ISAs v Pensions: The Official Retirement Debate

dunstonh

Can anyone recommend if now is a good time to start an ISA?

There is never a good time or a bad time.

EternallyGrateful

Thanks to all who have contributed to clarifying the points I raised in my previous posting. I have always trusted my IFA but I do like to explore the facts myself and consider the options based on my own findings. At the very least it provides an opportunity to have intelligent conversatioins with my IFA rather than sit there in awe of the jargon and nod compliantly. Encouragingly it seems (again) he has given me sound advice.

I must add that in one response my reference to this tax as being "government robbery" was questioned. Basically, along with 'all property is theft' I believe that all tax is robbery.

EternallyGrateful

BillionD wrote: »

Can anyone recommend if now is a good time to start an ISA? I have a few thousand tucked away which are earning a very low interest in an online savers account from lloyds.

I have got both Stocks & Shares and Cash ISA's, neither of which are doing particularly well at the moment. Markets around the world are just bobbing along with people talking about a 'double dip' recession so confidence seems to be low. Probably best just to find a cash ISA that's offering 3% or so and stick it in there. In 12 months time you'll be able to buy a week's shopping with the interest!

dunstonh

EternallyGrateful wrote: »

I have got both Stocks & Shares and Cash ISA's, neither of which are doing particularly well at the moment. Markets around the world are just bobbing along with people talking about a 'double dip' recession so confidence seems to be low. Probably best just to find a cash ISA that's offering 3% or so and stick it in there. In 12 months time you'll be able to buy a week's shopping with the interest!

ISAs can invest in around 50,000 different things. You say yours are not doing particularly well at the moment but I would say mine are. (if you call up nearly 10% in the last few months good) We almost certainly have different investments. That doesnt mean mine are right and yours or wrong. We could have investments that perform at different risk levels and in different ways at different times.

S&S ISAs also dont have to invest in stocks and shares if you dont want to. So, if you are concerned about the markets then you can invest in other asset classes. However, if you are concerned about the markets now, then you always will be. There are always reasons you can give yourself not to invest now. By the time you wait until you think its a good time, its more likely to be a bad time. You cant time the markets. You will fail.

EternallyGrateful

I understand what you're saying and I also understand that the two essential ingredients of financial markets are fear and greed.
My own ISA's increased in value by 4% last week! The previous week they went down by 1.5%. That's the stock market for you - nothing guaranteed. If the only spare cash I had in the whole world was £2k I'm not sure I'd risk it in stocks and shares right now. Alternatively, if it was something I could afford to lose then I would do the usual of spreading both my investment and risk and stick it on a horse!

EternallyGrateful

The main reason I joined this site is because my circumstances have changed dramatically over the last few months and there is a need to get my finances in order.

The dramatic change is that I have been diagnosed with liver cancer and my only hope of survival is a transplant. There are lots of complications so anytime within the next 12 months I could die. On the other hand I may not, and that scenario puts me in EXACTLY the same position as everybody else!

Basically we should all put the same effort into our finances on an ongoing basis as I am right now, but we never really stop to consider our own mortality. We tend to go along with life, hoping that we will live to an old age, that we will be healthy and that we have made sufficient financial provision for our future.

So, going right back to the original question – ISAs v pensions, I can only express a layman’s view based on very personal experience. For background information I am 57, self employed and have been told not to work. My wife is two years younger than me and also not working as she recovers from an operation. We are both considering calling it a day workwise, enjoying the time we have left and hoping it goes on for ever.

I have reviewed my (our) investments and we have money in cash ISA’s, with-profits policies, Stocks and Shares ISA’s and pension funds. The ratio respectively is roughly: 5:5:10:80. Two thirds of the money is in my name and one third in my wife’s. If the pension rules had been historically as flexible as they are today this would have been more like 50/50.

I am currently awaiting a medical assessment to determine whether or not I am fit enough to withstand a transplant. If I get through this OK I wait for a transplant – if I don’t get through it, well I haven’t clarified that just yet. So I have uncertainty heaped upon uncertainty and my finances have to cope with this situation just as much as I do!

The cash ISAs are going to get us over the first hurdle of uncertainty – both medically and as we consider our wider financial options. The stocks and shares ISA’s will be the next to go and following that a couple of with-profits policies we took out in the early 90’s will mature. They will actually be sufficient to see us through the transplant and a few years beyond that. All this time the pension fund remains untouched. On the other hand it could transpire that it makes sense to use the pension at an earlier date … who knows what new rules will get sprung upon us? The important thing is we have a range of investments that combined, give us flexibility, take away financial pressures and leave us to concentrate on me getting over the final hurdle.

Whether this has been worthwhile information or just me undergoing a cathartic exercise I don’t know. I just hope it will help others in deciding what course of action to take when considering their own ongoing finances.

JamesU

EternallyGrateful wrote: »

The main reason I joined this site is because my circumstances have changed dramatically over the last few months and there is a need to get my finances in order.

EternallyGrateful, the situation and uncertainty you discuss is daunting and I sincerely hope there is a positive outcome with your pending medical assessment. As you mentioned in an earlier post, it is important to explore and fully understand the facts and implications to make informed decisons that best meet your circumstances and planning. Fortunately, based on some of the specifics you mentioned, it seems you have a good IFA on board to assist with this.

Like yourself, I am going through a learning curve regarding the finer detail on pensions. That said, more experienced OPs on this forum can hopefully provide additional input in any grey areas you have as and if required, based on their own personal experience or professional expertise. Not formal advice of course, but often helpful to provide additional clarity and reassurance to help with decision making.


JamesU

Thrugelmir

EternallyGrateful, I always take inspiration from my Grandmother, who eventually lived to be 99 and 4 months. Her saying to me as a child was "Enjoy each and everyday as if it's your last". When you've lost 3 brothers in WW1 and survived the blitz of London. Then life has a different perspective. Puts one's own life into context.

In the event of death the majority of pension funds can be transfered to a spouse free of tax. So it would be worth confirming this before commencing any drawdown.

EternallyGrateful

Indeed you should enjoy every day as though it were your last ........... because some day it will be!

cagney123

Can somebody please advise,I am self employed and i took a private pension out with legal and general in 1985.I am 53 years old and the pension retiremant year is when i reach 60,i currently pay in £130 per month.I have just been reviewing my statement which reads as follows.

Fund value including bonus £27,188

Projected benefits at selected retirement age,

Lower rate higher rate
at age 60 your fund would be £52,200 £66,500
This could buy you a yearly pension of £2,390 £4,800
tax free cash sum £13,000 £16,600
Reduced yearly pension of £1,790 £3,600
From age 60 your pension in todays prices £1,580

Would i be better off freezing this pension and putting the £130.00 in an isa, the reason i ask if you look at the figures since 2003 my yearly projected pension hardly moves.

2003 £2,030
2004 £2,140
2005 £2,180
2006 £2,070
2007 £2,720
2008 £2,520
2009 £2,200
2010 £2,390

As you can see by the figures im looking at an average of £40.00 a week and im only on £360.00 per year more than i was in 2007.

Please help if you can as i just dont know what to do for the best.

Kind regards...David