Wwyd?

jem16

atush wrote: »

true, but yet the compounded returns on 80 in an isa will be lower than the compounded returns on 100 in a pension. Assuming equivalent investments in both.

Yes atush but in the case of a basic rate taxpayer, it's only the advantage of the tax-free part that makes the difference. The fact that it's growing higher because of tax relief simply means that more tax will be due.

As jamesd says, wait until you could get higher rate tax relief instead of basic rate or there is an employer contribution, then there is a real reason.

ViolaLass

jamesd wrote: »

It's a shame that you agree because it is wrong.

I was agreeing with the second point, not the first one.

But honestly, I've been massively distracted this afternoon by a baby who won't nap and I'm happy to admit that right now I have no idea about pensions. Hopefully you can all enlighten the OP coz I can't.

atush

James can say what he likes, I dont agree here even if I do elsewhere on other matters.

You are waiting on a pipe dream of HRT which may never come, and not taking into account the compounded returns on decades of the returns on the extra 20%. Plus the assumption that 75% of the pot will be taxed, which in this case with an early retirement it may not be. As there is PA to be mopped up.

Viola, Baby or not (and try breastfeeding two at once) James isn't always right.

jamesd

ViolaLass, maybe you might start a thread asking about pensions so people here can answer your own questions?

For me pensions are efficient and I'm going to end up paying for my home with just income tax and NI relief. Ignoring investment changes I'll get to the point where I can do that by this time next year so I'll end up with pension income and a "free" home. Because of my age i made heavy use of pensions but still used ISA for a large chunk to get access, a chunk I'm now moving into a pension via salary sacrifice. On some of my pension contributions I get a combined 58.9% income tax and NI relief.

atush, 75% will be taxable but you're right that there may be no tax to pay if it's all within the personal allowance.

It's not just higher rate income tax but salary sacrifice. The employer is going to have to start a pension at some point and salary sacrifice is the efficient way to do that, or a later employer may use salary sacrifice. Two of the traditional main political parties - Labour and Liberal Democrat - seem inclined to change pension tax relief, increasing it outside salary sacrifice for those paying basic rate income tax. Those are plenty of reasons for a person with no urgent need to use a pension to defer for a while and use ISA instead for a while to get the compounded growth until they see what the future brings.

ViolaLass

jamesd wrote: »

ViolaLass, maybe you might start a thread asking about pensions so people here can answer your own questions?

I don't have any, I'm happy with my arrangements. I think you misread what I typed - my point was that not-napping-baby was sapping my ability to think, not that I usually don't know anything about pensions.

jamesd

Got it, sorry about that.