ISAs v Pensions: The Official Retirement Debate

nojoe

Good luck with your recovery - I hope you get to lead a long and happy life (and spend that pension for years) as a result. I'd been feeling miserable this morning -splitting headache and sick stomach - but that sort of puts it in perspective.
But back to money.
You are right that the benefit system does not encourage people to save more than a modest amount. Declaring anything more than £10K will start to cut the money paid - and this same stupidity will continue under Universal Credit - but should I find myself in that position I will have money to spend. I think my family might be more appreciative of that rather than the reassurance that I will be just fine when I'm retired. Getting my hands on my own money once it is locked into a pension fund is not nearly as straightforward.
I know Martin is a fan of pensions though even he sees it as part of an overall fund - including property and ISAs - but for those of us who are finding that we are paying out more than we are taking in at the moment this is not a realistic proposition.
As for being cynical about the financial sector? What can I say?

dunstonh

I can save for decades and have no idea how much income i will have in retirement because that will depend entirely on inflation in the meantime and on the rates available when you take all my cash and hand me back a pittance.

What has that got to do with pensions? Thats the same with any tax wrapper you use.

Have you seen how much you need to save in order to be just £50 a week better off?

For a 25 year old thats about £25pm.

Meanwhile the fund managers are laughing all the way to the bank.

I dont mind. If they are returning me nearly 14% a year after charges over the long term then I dont mind their charges. If I chose not to pay their charges then I would use different investments which cut out the fund manager. You have a choice and lets hope that choice continues.

nojoe

Wow! That's me told off. And great news as well. 14% returns are not to be scoffed at. I'll have some of that. Can you guarantee that over the next 40 years? And how do you calculate the real rate of return if I have to take out a car loan next year?

dunstonh

Wow! That's me told off. And great news as well. 14% returns are not to be scoffed at. I'll have some of that. Can you guarantee that over the next 40 years?

of course it cant be guaranteed. Its just what I have been getting on my own pension as an average. Like everyone else I have had good years and bad years.

Why should it be guaranteed? If I wanted lower risk options with some guarantee in place (which sort of exist to some extent) then guarantees cost money and the returns would likely to be lower.

LongTermLurker

nojoe wrote: »

I think you are complicating things again.
I can save for decades and have no idea how much income i will have in retirement because that will depend entirely on inflation in the meantime and on the rates available when you take all my cash and hand me back a pittance.

It doesn't matter whether you're investing in a pension, investing in a S&S ISA or saving into a cash ISA - you've still no idea of the income rate at any point in the future. You might have access to your capital, but have you ever found yourself at the bar with only a quid left in your pocket? That won't even buy you a loaf of bread when you retier and have spent all your future on a car. At least a pensionguarantees you an income forever (and your wife after you die) - an ISA won't offer any guarantees at all.

And I don't see my boss adding to my ISA either...

But your circumstances are your own - it's a bit offhand of you to call someone with different requirements to you "barking".

charleyhellfire

A great read this thread is, anyway if somebody would be good enough to answer my little query I'd be most grateful.

My company pension scheme - final salary 1/60th - is closing down on the 31/12/10, I have 34 years in...I'm 50. The company are offering a GPP with Aegon with a standard 0.45% AMF across most of the funds under management, they will put in 7% along with my 7% around a total monthly figure of £330 through salary sacrifice...I hope to retire at 56, which gives me only 6 years to build up something like a reasonable amount. My question is this; will it be worthwhile me bothering at all and if it is, will it be advantageous to bump up my contribution to 10% and delay taking it until I'm 60, since I won't really need the money?

I am fully invested in cash ISAs (£53k) earning 3.5% fixed for another year and a significant amount in dividend producing company stocks and investment trusts (£40k)...oh and my mortgage has £150 left to pay @ £3.90 a month.

Thanks in advance.

:cool:

dunstonh

My question is this; will it be worthwhile me bothering at all and if it is, will it be advantageous to bump up my contribution to 10% and delay taking it until I'm 60, since I won't really need the money?

You pay in 7% (which actually costs you 5.6% if you are a basic rate taxpayer. Plus you pay lower NI too). They add 7%. So, using your figure of £330, that is actually costing you around £250 and is being increased to £660.

Can you think of anything else that overnight will turn £250 into £660?

6 years of that will soon add up.

I am fully invested in cash ISAs (£53k) earning 3.5% fixed for another year and a significant amount in dividend producing company stocks and investment trusts (£40k)...

One assumes you have those investment trusts in an ISA as well?

charleyhellfire

No I don't actually, I don't like to pay the charges...and I haven't really looked into S&S ISAs - am I barmy?

Oh just one more thing...income drawdown, isn't there a minimum £50k needed before one can use this method?

Yes I'm a basic rate taxpayer, by the way.

Cheers.

dunstonh

No I don't actually, I don't like to pay the charges.

There shouldnt be any extra charges nowadays for the use of the ISA wrapper.

am I barmy?

No. Although it could increase the tax you pay later.

Oh just one more thing...income drawdown, isn't there a minimum £50k needed before one can use this method?

No minimum other than what providers will offer. The lowest minimum I know of from the top of my head is £3600.

charleyhellfire

Thanks very much dunstonh, it seems I have nothing to lose.

:cool: