ISAs v Pensions: The Official Retirement Debate

atush

that was well, kinda rubbish.

IFA and other sin the industry don't lose your money, what you invest it in does. They help you understand your risk profile, and help you with tax wrappers. Some will help you decide what to invest in, based on your attitude to risk.

And I remember when everyone hated estate agents and lawyers not the fashionable hate for bankers today.

dunstonh

Why are charges not important?

who said they are not important?

You state that you are a IFA. You charge for advice so why would you say this is not an important consideration?

I didnt say it was not important.

dunstonh

Note also that if you invest yourself the capital is yours as well!

Albeit a smaller pot.

The investment industry takes all it's "commissions" up front even if it looses your money.

What commission?

Yack

I have to make a decision on whether to go with an annuity or income draw down with a financial advisor using a pot of approx. £100k.
I am starting to favour draw down and have spoken to a couple of companies who specialise in this area but how can I check out these companies to ensure they are OK?

dunstonh

Yack wrote: »

I have to make a decision on whether to go with an annuity or income draw down with a financial advisor using a pot of approx. £100k.
I am starting to favour draw down and have spoken to a couple of companies who specialise in this area but how can I check out these companies to ensure they are OK?

Your post isnt really connected with this thread. You may wish to start a new one of your own or find a thread that is similar in subject (new thread is better).

EternallyGrateful

Yack wrote: »

I have to make a decision on whether to go with an annuity or income draw down with a financial advisor using a pot of approx. £100k.
I am starting to favour draw down and have spoken to a couple of companies who specialise in this area but how can I check out these companies to ensure they are OK?

Wrong thread or not here's my tuppence worth!

I recently decided to take an income draw down from my pension fund - after taking the tax free cash of course which I re-invested. I chose that over an annuity for several reasons: 1. My age. At 59 I felt an annuity was too final. I have 15 years or so before I need to make that decision. 2. My personal circumstances. I have other forms of income (tax free cash and funds) that will supplement the draw down money whilst my pension pot (hopefully) grows. 3. Tax. Without boring you with all the detail a draw down allowed me to take better control of my tax burden.
Speak to an IFA who will advise you wrt your different options. You may even find one nearby

gingerpo

I haven't gone through all the pages yet, so apologies if i'm repeating a question that has already been asked.

I understand that the main advantage of personal pension schemes over investment ISAs is the tax relief. However, in my case, i don't often work in the UK and all my interest on any savings at the moment is tax free. I also plan to retire abroad. So does this benefit in tax relief make much difference to me?

Also, what is the difference, for me, between any type of savings - building societies, non-investment ISAs and personal pension schemes?

at this point in time, i am eligible for a miniscule state pension and depending on where i retire, i might not get that or may not get any increase in the pension amount after my initial claim. i also get no S2P as i contracted out for several years.

i have a miniscule personal pension with a transfer value of less than 1,000 pounds. is it worth me paying a lump sum into the pension or put the money into savings for which i can only get 2-3% interest at the moment?

dunstonh

understand that the main advantage of personal pension schemes over investment ISAs is the tax relief. However, in my case, i don't often work in the UK and all my interest on any savings at the moment is tax free. I also plan to retire abroad. So does this benefit in tax relief make much difference to me?

If you are not UK resident then you cant have a UK pension or ISA (caveats apply).

Also, what is the difference, for me, between any type of savings - building societies, non-investment ISAs and personal pension schemes?

A pension is a tax wrapper that contains investments. It is not actually an investment itself. A building society account is method of saving. cash ISAs are savings accounts that are tax free. You cant compare cash savings with a pension wrapper. Very different things designed to cover different goals and timescales.

gingerpo

Thanks dunstonh.

I think that I am still considered a UK resident, according to the gov.uk website information anyway.

My question specifically relates to 2 aspects of the tax for personal pensions. the tax relief, which other posts have referred to eg if i pay 80 pounds into my personal pension then the gov adds another 20 pounds in tax relief. I don't understand what this 20 pounds is, where it comes from and if i would get it. I understand that once i receive income from a personal pension that it would be taxed but if it was within the tax allowance at the time then I assume I wouldn't be taxed. is that right?

I'm afraid I don't understand the difference between all the possible saving options. As I currently don't pay tax on any of my savings ie building society accounts, bonds, ISAs, I assume I can just keep investing in them for the next 20 years and as long as all the interest is within the tax allowance then I don't pay tax. At least with these kind of savings I can get a fixed rate of interest, albeit very low at the moment, whereas pensions, as i understand it, can have very limited growth and there is the risk that they can even lose money. is there any data on the average % of growth of pensions over the last few years? Is it comparable to interest rates? or have I just misunderstood pensions completely?

i'm afraid i don't explain myself well because I don't really know what i'm talking about and i don't know the right words/jargon to explain things.

EternallyGrateful

gingerpo wrote: »

My question specifically relates to 2 aspects of the tax for personal pensions. the tax relief, which other posts have referred to eg if i pay 80 pounds into my personal pension then the gov adds another 20 pounds in tax relief. I don't understand what this 20 pounds is, where it comes from and if i would get it. I understand that once i receive income from a personal pension that it would be taxed but if it was within the tax allowance at the time then I assume I wouldn't be taxed. is that right?

If you're not a tax payer you can still pay £2880 into a pension fund and the pension provider will credit your 'pension account' with £3600 which represents the tax relief. You can pay in more than that but will get no further tax relief. When you eventually take an income from your fund tax will be calculated only on the amount you receive that is greater than you tax allowance.

gingerpo wrote: »

I'm afraid I don't understand the difference between all the possible saving options. As I currently don't pay tax on any of my savings ie building society accounts, bonds, ISAs, I assume I can just keep investing in them for the next 20 years and as long as all the interest is within the tax allowance then I don't pay tax.

Correct. Of course you have to add the interest received from a non-ISA account to your earnings to establish where you fall relative to your tax allowance. Interest from an ISA account is always tax free.

gingerpo wrote: »

At least with these kind of savings I can get a fixed rate of interest, albeit very low at the moment, whereas pensions, as i understand it, can have very limited growth and there is the risk that they can even lose money. is there any data on the average % of growth of pensions over the last few years? Is it comparable to interest rates? or have I just misunderstood pensions completely?

"Average growth" data on pension funds will not help you. If I have one foot in the freezer and one foot on a hot plate on average I'm quite comfortable.

gingerpo wrote: »

i'm afraid i don't explain myself well because I don't really know what i'm talking about and i don't know the right words/jargon to explain things.

You probably need to speak to IFA.