Personal Pension into Sipp

atush

The point is, all other thing being equal, that investors only need a slightly better return to beat the 20% tax relief on pension contributions.

The point is, you can choose the same investments inside the pension so would not do 'slightly better' than the pension. So the pension would get 'slightly better' plus tax relief.

fairleads

atush wrote: »

The trick is to choose two or more ponies.

All you eggs in one basket is not a wise approach.

The non pension pony has many options many producing tax free gains and income.

fairleads

atush wrote: »

The point is, you can choose the same investments inside the pension so would not do 'slightly better' than the pension. So the pension would get 'slightly better' plus tax relief.

I'm addressing my post to the savvy investor. Pointing out that there is more to life than pensions.After all, the much vaunted 25% taxfree PCLS will, for many pensioners, be less than the total value of their contributions. So many end up paying tax in retirement on some of their own capital.

atush

And I am addressing him to make sure he knows your advice is slightly suspect (in your distaste for pensions).

ISAs are great, he should have them. But not only them.

Everyone has a personal allowance in retirement. To structure all of your income to come from ISAs, and not use this allowance is foolish int he extreme.

So, in theory a retired person drawing on a pension that takes up their personal allowance, plus ISA income on top, will do better than the ISA only retiree.

dunstonh

fairleads wrote: »

The point is, all other thing being equal, that investors only need a slightly better return to beat the 20% tax relief on pension contributions. In addition, one can trade within an Isa and make taxfree gains. This applies up to and after retirement. Whereas 75% of pension gains will be subject to tax in retirement. Further, in drawdown, income is adjustable only every three years. Pensions are not for BR tax payers unless of course, their employer at least matches the individual's contribution.

It is not a valid point.

If there is an investment that you think is going to give a slightly better return then use it in the pension. The same investment in a pension and ISA will produce the same return. The only difference is tax and maturity process.

The pension will provide the higher income out of the two even if every penny is taxed at 20% basic rate.

fairleads

dunstonh wrote: »

It is not a valid point.

It is entirely valid. The S&S Isas allows for tax free gains. The pension dosn't.

If there is an investment that you think is going to give a slightly better return then use it in the pension. The same investment in a pension and ISA will produce the same return. The only difference is tax and maturity process.

The pension will provide the higher income out of the two even if every penny is taxed at 20% basic rate.

Incorrect. Isas allow taxfree gains that can be taken as income in retirement. But then again if one is happy with HMRC controlling 75% of your retirement capital, and charging tax for the privilege...........

dunstonh

ncorrect. Isas allow taxfree gains that can be taken as income in retirement. But then again if one is happy with HMRC controlling 75% of your retirement capital, and charging tax for the privilege...........

Pensions are geared to provide income. ISAs can provide income but if you start eating the capital away then you will get less income. The income will be less than a pension.

fairleads

atush wrote: »

And I am addressing him to make sure he knows your advice is slightly suspect (in your distaste for pensions).

ISAs are great, he should have them. But not only them.

Everyone has a personal allowance in retirement. To structure all of your income to come from ISAs, and not use this allowance is foolish int he extreme.

So, in theory a retired person drawing on a pension that takes up their personal allowance, plus ISA income on top, will do better than the ISA only retiree.

Its not so much a distaste for pensions but rather that there is a better option. Have you ever considered the fact that in retirement the Isa investor has the potential to not only draw, tax free, an income of such magnitude that a pensioner would pay HR tax on. But also receive a monthly income from a few part time monthly consults, that, because of the unused PA, is also tax free.
I don't expect IFAs to under stand /acknowledge this. But you, with your scientist's brain..........................

fairleads

dunstonh wrote: »

Pensions are geared to provide income. ISAs can provide income but if you start eating the capital away then you will get less income. The income will be less than a pension.

Drawdown from the Isa presents similar challenges that pensioners face. But without the tax penalty. The Isa income, therefore, will be greater. Not by much I grant you, but definitely more.

atush

fairleads wrote: »

Its not so much a distaste for pensions but rather that there is a better option. Have you ever considered the fact that in retirement the Isa investor has the potential to not only draw, tax free, an income of such magnitude that a pensioner would pay HR tax on. But also receive a monthly income from a few part time monthly consults, that, because of the unused PA, is also tax free.
I don't expect IFAs to under stand /acknowledge this. But you, with your scientist's brain..........................

Your original hypothesis did not mention part time work using up the personal allowance so is therefor invalid to my argument. Any good experiment lays out such factors in the beginning, you may not change the parameters of an experiment midway. You have to start a new experiment.

In any case, and investments made in an ISA can also be made within a pension. Therefore, a pension is a wise move, esp in this day and age where an employer must contribute too. No one will contribute to your ISA but you.

But, savings in ISAs outside the pension are also a wise move. An investor is always better having both.