Pension vs ISA

duckiex

Hi,
I have a question for people. Where i work i currently pay around 8% of my wage in to my work pension. Because i pay over 5%, work also chuck in 5% value of my wages in to a pension for me. Therefore i have 13% all together where only 8% is only actually my money. With the latest stuff going on with pensions would it be more beneficial to me to put on 5% of my wages (so i still get the maximum input from work of 5%) and then the other 3% in to an ISA?
What do people think?
Thanks

Lokolo

What do you mean by the latest stuff going on with pensions?

dunstonh

There is a pension vs ISA sticky thread in the pensions forum.

With the latest stuff going on with pensions

Nothing going on with pensions. What is it that you think is going on?

would it be more beneficial to me to put on 5% of my wages (so i still get the maximum input from work of 5%) and then the other 3% in to an ISA?

Most employers will not pay you the employer contribution in your wage. They have to pay higher NI if they do. Plus, you have to pay tax and NI on it as well. You dont with the pension.

So, assuming the typical employer, the pension would get 13% going in and the ISA get 6% going in whilst costing you the same. End result is the pension gets twice as much as the ISA and therefore provides twice the benefit.

jem16

duckiex wrote: »

With the latest stuff going on with pensions would it be more beneficial to me to put on 5% of my wages (so i still get the maximum input from work of 5%) and then the other 3% in to an ISA?
What do people think?
Thanks

Assuming you mean that you are going to pay 5% into your pension to get the employer 5% contribution then that is certainly sensible. 10% contribution for 4% ( or less) actual contribution from yourself.

For the other 3% it depends on your current tax status and whether or not you pay into your pension through a salary sacrifice agreement.

If you are a higher rate taxpayer who would likely be basic rate in retirement then the pension is the best option. 40% tax relief and 20% to pay.

If you are a basic rate taxpayer and use a salary sacrifice method of payment then you gain with lower NI contributions.

Basic rate taxpayer with no salary sacrifice, S&S ISA may well be best.