ISAs v Pensions: The Official Retirement Debate

dunstonh

Sadly for me I think so.

If you are accepting of the risk of income fluctuation that an ISA would suffer then you should be able to accept the same risk in another tax wrapper.

I believe the loss to those who have yet to cross the 65 threshold will be £300+ per year

The age allowance was reduced for those earning over £22,900. So, in that respect, you will probably be gaining from the budget removal of the age allowance.

Credit-Crunched

srcandas wrote: »

At least in an ISA I'm not tied to an annuity and in any case I can always dump from ISA to pension in the final 12 months if things change.

You will only be allowed to contribute £50,000 or 100% of your earnings if below £50k

So if you are looking at a pension of £24,000 p.a your pot will well exceed that.

srcandas

dunstonh wrote: »

If you are accepting of the risk of income fluctuation that an ISA would suffer then you should be able to accept the same risk in another tax wrapper.

I think I missed something

• I have state-pension of say £5000
• Pru annuity of £7000 (cause it is guaranteed at 0.93)
• And a fund of £160000 (say £9000).

Are you saying that I can do draw down on the £160000? Light bulb flickers. I thought the £20000 limit was in addition to draw down.

Hell I better read this thread again

dunstonh

Are you saying that I can do draw down on the £160000? Light bulb flickers. I thought the £20000 limit was in addition to draw down.

You can do capped drawdown (which is the old fashioned method) where you leave the fund invested as you wish, take your 25% (either up front of in stages if you go phased drawdown - which can be very tax efficient) and then take the income of your choice subject to GAD limits.

The fund can be invested in the same was as you would an ISA. The main difference is that ISA is more flexible on capital withdrawals (as pension is income provision).

mirabelle

Signatures on this e-petition on the Government website has now reached over 32,000 this morning.

This can be found under "restoration of the age related tax allowance".

srcandas

mirabelle wrote: »

Signatures on this e-petition on the Government website has now reached over 32,000 this morning.

This can be found under "restoration of the age related tax allowance".

I guess the very low number is a clear indication that most by an enormous margin are against this petition.

What would be interesting is to know how many of those 32000 just signed it out of totally selfish motives and how many signed it without thought of personal gain.

From the posts here I can see that those who agree are largely those who will gain as individuals. Those against include those who will lose out. Interesting IMHO :beer:

Paul_Herring

srcandas wrote: »

From the posts here I can see that those who agree are largely those who will gain as individuals. Those against include those who will lose out. Interesting IMHO :beer:

I'd be more interested in seeing the reaction if/when NI and Income tax are rolled together (there's been talk of such,) since currently
1) anyone over state pension age ceases to pay NI, even if they're working, and
2) NI isn't charged against pension income at all regardless of age

atush

I'd be in favour of changing no1- anyone working (over the min hours/wk) should pay NI.

2, not so much.

Paul_Herring

atush wrote: »

I'd be in favour of changing no1- anyone working (over the min hours/wk) should pay NI.

2, not so much.

You're missing my point - the speculation is they'll bundle NI into income tax, so no-one gets charged NI any more - they all simply pay (loosely based on today's rates) 31% basic rate, 51% higher rate, income tax on ALL income, regardless of age.

Meaning that both groups I mentioned will end up paying more tax - without age-related allowances, you can't separate them.

(My example rates also miss the finer points of NI where it tapers, and doesn't include, at all, employer's NI.)

srcandas

Paul_Herring wrote: »

You're missing my point - the speculation is they'll bundle NI into income tax, so no-one gets charged NI any more - they all simply pay (loosely based on today's rates) 31% basic rate, 51% higher rate, income tax on ALL income, regardless of age.

But the world is not like that. Taking just one aspect of life will always lead to unreasonable conclusions IMHO.

At the end of the day (as Becks would say ) it is the accumulative result on individuals that matters.

If they amalgamate tax and NI it may be that the administration costs are reduced and the cake for all is bigger.

It may be that pensions go up faster than otherwise.

It maybe ......

These details are important but not as important as:

What kind of society do we want?
How do we want to care for the unlucky?
How do we want to care for the stupid?
How much state do we want?

An example of the complexity: It may be sensible to discourage older people working so that more younger people can. You might adjust the tax system to make that happen. As a result older people may feel safer (and thus happier) as there are more responsible youngsters who are contributing to their futures. ......

If we take any individual crumb we can all criticize but it is meaningless.

I guess I want to ask if giving more to the old will make our lives (everybody) better off? And if so how?

Hope that makes sense :beer: