Pension benefits?

PenPincher

Could anyone explain any benefits to a private pension compared to just saving in an ISA please?

The reason I ask is that in the back of my mind, I imagine being told I have X years left at 40 and not being able to splurge in my last few years...

Yes, I am a little irrational sometimes

I opened a stakeholder pension with Virgin more out of interest (not the financial kind) than anything.

Thanks!

dunstonh

Could anyone explain any benefits to a private pension compared to just saving in an ISA please?

There is an ISA vs pensions sticky at the top of the forum. First few pages have some good detail but note the allowances and figures are a few years old.

When comparing ISAs to pensions remember that it is S&S ISAs that are being compared. Not cash ISAs. Cash ISAs do not suitable for very long term provision on something like this.

I opened a stakeholder pension with Virgin more out of interest (not the financial kind) than anything.

Just about the worst stakeholder pension on the market. What made you choose it?

Linton

PenPincher wrote: »

Could anyone explain any benefits to a private pension compared to just saving in an ISA please?

The reason I ask is that in the back of my mind, I imagine being told I have X years left at 40 and not being able to splurge in my last few years...

Yes, I am a little irrational sometimes

I opened a stakeholder pension with Virgin more out of interest (not the financial kind) than anything.

Thanks!

The main tangible benefit is tax. You are allowed to take out 25% as a tax free lump sum having put money in tax free. A pension is more beneficial to a higher rate tax payer as they get HR tax relief paying in and may only be on standard rate after retirement when the pension pays out.

Other possible advantages are:

1) Money held in pensions isnt normally considered part of your wealth for bankruptcy. ISAs would be. Similarly for means tested benefits.

2) If you feel you might get an irresistible desire to spend all your worldly wealth on a new car/round the world cruise/ etc a pension will prevent you. This of course could be considered a disadvantage.

3) You can put any money you like into a pension upto your annual earned income. ISA's are of course limited.

PenPincher

dunstonh wrote: »

When comparing ISAs to pensions remember that it is S&S ISAs that are being compared. Not cash ISAs. Cash ISAs do not suitable for very long term provision on something like this.



Just about the worst stakeholder pension on the market. What made you choose it?

Thanks for the feedback! After flicking through a few pages I can see you make a huge contribution here - kind of you, thanks!

Here's where you learn how weird I am - I opened the Virgin stakeholder to learn more about how pensions work. I learn best by doing - I had no intention of actually contributing to it, as I was put off Virgin for life while looking for S&S providers.

Linton - some great points, thank you for your feedback.

For the record, I'm signing up to my employer's scheme (local government), I just feel safer having money elsewhere too

I have many other complexes too, which I'm sure you don't want to go in to :rotfl:

Linton

PenPincher wrote: »

....

For the record, I'm signing up to my employer's scheme (local government), I just feel safer having money elsewhere too

Of course this highlights another great advantage of a pension which I should have mentioned - your employer wont contribute to your ISA.

atush

First of all congrats on your great pension with your employer. second, hope you haven't worked there long and are just joining now.

Second, the benefits of ISas as opposed to pensions. First of all for every 80 you put in, is rounded up to 100. 8000, is rounded up to 10K etc. If you put 8K into an isa, well it is worth that. No one is going to give you that etra 2K. Add in the extra you get if you are a higher rate taxpayer (ie you put in 60- ie 80 minus the 20 you get back on your taxes-, your pension has 100).

Then you have employers contribs. this is 'free money' and anyone at any rate of tax who doesn't take it is just plain simple minded.

Cash ISAs are great- for emergency cash and cash you might need to spend in the next 5 years or so. Long term, equities outpace the rate you get from cash (or property) so if you are saving into ISAs for retirement and not short to medium term then you should have S&S ISas.

The long and short of it is- they are not mutually exclusive. have both.