Pension or ISA

paddyvxr

I have an opportunity to join a defined contribution work pension where my employer will match the amount I put in. On a 35K salary I would look at possibly putting in £200 per month. However I am 47 years old with a plan to retire between 55 and 60.

My question - would I be better advised to join the pension scheme and tie my money up, or continue to put the equivalent cash away in ISA and Saving accounts as I already do, with accounts paying circa 3% interest.I review and change saving and ISA accounts every year to get best available deals.

Any advice welcomed.

JoeCrystal

1. The employer contribute to your pension
2. You get tax relief on the contribution.

You pay net cost of £160 to get pension fund of £400 per month. Investment funds may outperform the savings accounts & inflation in long run.

Saving into cash isa/savings account will only erode your savings in long term, 13 years inflation can reduce value of savings significantly so you would have to put away far more than £200 per month.

Ideally, you should be doing both in my opinion.

You would also need to see if you can decide what kind of income you want to get at your retirement age and adjust the contribution in hope to meet that target. As you are age of 47, I am hoping that you also have other pension schemes that you can use when you reach retirement age! Here is the link to pension calculator. to give you some idea.

Do you know how far your employer is willing to match your contribution? Generally, it is good idea to match it fully to take full advantage of free and extra money into your pension fund.

Cheers

Joe

xylophone

If you already have emergency savings in ISAs but no pension and your employer is now prepared to contribute to a pension scheme, it would seem to me to be unwise to forgo the chance to build up a pension.

kidmugsy

You are about to get a flood of advice to join the pension because you'll get free money. Every £200 you add costs you £160 out of your pocket, because of the tax avoided. For that, you get £400 in the fund. Ignoring any growth, when you cash it in ("crystallise" it) you'll get £100 out tax-free. So the remaining £300 will have cost you £160 - £100 = £60. That remaining £300 can be got at by buying an annuity or doing 'income withdrawal'.

A counter argument would arise if you had expensive loans to service or if you were short of emergency funds, but it doesn't sound as if either is a worry to you.

dunstonh

There is pension vs ISA sticky in the pension forum.

gadgetmind

paddyvxr wrote: »

However I am 47 years old with a plan to retire between 55 and 60.

You've already had a lot of good advice.

My question is in regards to this plan to retire at 55. Or 60. Have you worked out in detail how you're going to achieve this?

I hate to burst and bubbles, but unless you've got solid foundations in place, eight years isn't long enough to do anything other than finesses things.

DiggerUK

It's more or less a choice between two thieves.
Out of the two, at least the ISA road leaves you the option of moving funds to find a safer haven.
The pension thug will nail your head to the wall with no option to change.
..._

Ifts

Should I invest in an ISA or my pension? http://moneyfacts.co.uk/guides/investments/should-i-invest-in-an-isa-or-my-pension100311/

lvader

DiggerUK wrote: »

It's more or less a choice between two thieves.
Out of the two, at least the ISA road leaves you the option of moving funds to find a safer haven.
The pension thug will nail your head to the wall with no option to change.
..._

You have more investment choices in a pension than an ISA.

gadgetmind

DiggerUK wrote: »

Out of the two, at least the ISA road leaves you the option of moving funds to find a safer haven.

Yes, there are choices of assets classes in ISAs,

The pension thug will nail your head to the wall with no option to change.

Sorry, but that's beyond wrong. You have *more* choices regards asset classes in a pension.

Please defend your statements or retract them.

DiggerUK

gadgetmind wrote: »

......Please defend your statements or retract them.

Once the money goes in to a pension it is trapped there until you are 55 years of age. (providing there is no change in the law)
If the assets the pension are invested in go sour, how can the money invested be retrieved?.... simple, it can't.
At least with ISA's...(Cash or S&S) you can make alternative arrangements to provide for retirement.
..._