Post-Budget - Personal Pension or Savings?

TommyTucker_2

HI guys

I wonder if you could help me come to a decision?

I am 41 years old, and earn approximately £18,500 pa.

I started a personal pension last year, and have been paying the minimum allowable amount of £100 per month.

I am a fervent saver, and have approximately £20,000 in savings (ISAs & savings accounts), and I'm able to save around £500 per month.

Now, when I first heard the proposal that from April '15, those over age 55 with a personal pension can take all of their fund as cash (albeit some would be taxable), rather than the current maximum of 25% tax-free cash, I thought to myself:-

Why don't I stop paying into my pension, and save everything into ISAs. Then, when I reach the relevant age for taking my personal pension, I could transfer ALL of my savings into a pension company, to then take an annuity - if I wanted to. That would give me more flexibility in my options, rather than locking the £100 pm into my personal pension.

Would that work? Or is there a limit to the amount that you can invest into a personal pension as a one-off lump sum?

Would I just be best to keep things as is, i.e. keep paying my £100 per month, and putting the rest into savings? After all, I do get tax relief on my premium payments - and I am investing in the stockmartket within the pension.

I would really appreciate some guidance here.

Best regards

Tommy

atush

Why don't I stop paying into my pension, and save everything into ISAs. Then, when I reach the relevant age for taking my personal pension, I could transfer ALL of my savings into a pension company, to then take an annuity - if I wanted to. That would give me more flexibility in my options, rather than locking the £100 pm into my personal pension.

Well first of all, ISAs dont' get tax relief. And if they are in cash, they don't even get compounded investment returns.

So no, this would be a hugely bad idea.

then we have annual limits. This coming year that will be your income, up to 40K. If you saved 100 K in isas (hard to do with cash but still) it would take you many years to get that into a pension. So you would not be able to put more than 18K in per year.

Then, we have employers contribs. Doesn't your employer have a plan that they contribute to?

Personally, unless you have big spending plans coming up, id put a lot of that 500/m into pension. If you have upcoming spending plans, i'd still put more into the pension and the rest into S&S isas (not cash) unless these plans were fairly iminent..

mania112

You earn £18.5k and save £500 per month... what's the secret?

TommyTucker_2

Hi, and thanks for your quick replies.

Atush - Thanks. I would be vary wary about paying all of my savings into my pension. In a way, I think you're right to suggest it - but still, the fact that it's locked away kind of puts me off a little. In the future I would like to buy a cheap auction property or two, to renovate & sell on... just a dream.

Mania - Lol, my secret is that I have no life! So I have lots of spare money rolling around and nothing much to spend it on. At least, until I get a life!

Best regards,

Tommy