ISA V Pension

pennyshahin_2

Hi I'm a part time cleaner and our company is about to start auto -enrolment with NEST , I don't earn enough to go in automatically and I don't pay tax-I don't understand about pensions would I be better of saving £5 a week and putting it in a cash ISA, I also have £20,000 in premium bonds would that be better in a savings account.

dunstonh

Premium bonds are typically poor value and cash ISAs are unsuitable for long term provision. Plus you dont get free money with the cash ISA that you get with NEST.

stinktankcynic

Premium bonds are OK, if you have lots of money. A pension if your not a higher rate taxpayer and/or not receiving an employer contribution could be an even greater gamble. Save thousands of pounds, locked away for years at the end you usually have to buy an insurance product called an annuity.
I'm worried that pensions could be a huge scandal in future years. A pension is fine, it's what you do with it is concerning.

Lump sum could be abolished.
Auto / nest type pensions will provide enough to stop means testing, but maybe not much more.
Low value pots, difficult to get a decent annuity.
Annuities, how low can they go? At what % do pensions become pointless?

With sp2 about to be abolished, the government gives you the option of joining a scheme to make up the difference you would have got before the single tied pension came in.

This is before any government levies or further tinkering.

If you knew what the government had planned for pensions and what annuities would be in the future, a lot of the uncertainty would be removed, but we don't.

Think carefully because there are other ways to save for retirement where you have more control at the expense of tax relief now.

alexanderalexander

Firstly, whatever you end up doing you should bear in mind that Premium Bonds are not generally a good investment -- have a read of this MSE article which explains how the effective interest rate is actually pretty abysmal: http://www.moneysavingexpert.com/savings/premium-bonds

Secondly, from the title of your thread, I take it that you are looking to save for retirement? In this case, how long is it until you retire? If it's more than 10 years you should probably be looking at stocks and shares investments rather than cash. Is the £20,000 intended exclusively for retirement or is it a general cash cushion which you might need? In the former case it might be best to invest it in a stocks and shares ISA as over the long term it'll grow more than in a bank account / premium bonds.

Just_landed

Have a look here

Link :-

https://forums.moneysavingexpert.com/discussion/375217


:eek:

atush

Join the nest scheme, even if just for the employers contribution. But i'd also try to increase your hours and earn more and save more.

FatherAbraham

stinktankcynic wrote: »

Premium bonds are OK, if you have lots of money.

Absolute nonsense.

Premium bonds are just about worth considering if one is a higher-rate tax payer, with no other tax-efficient savings options available.

For a non-taxpayer, like the OP, they're usually a colossal waste of money, thanks to inflation.

The amount of money (capital) one has in premium bonds is an irrelevance to their quality as an investment.

Warmest regards,
FA