pension vs isa

JethroUK

I'm convinced my new company pension scheme at 2:1 returns as good as it gets

But the trouble with a pension is that is the last time I see my dough and when it mature s (and the gov could move that post) the best I can do is put it in an annuity (for who knows what lousy rate) and get at best a sniff of it once a year

jem16

JethroUK wrote: »

I'm convinced my new company pension scheme at 2:1 returns as good as it gets

But the trouble with a pension is that is the last time I see my dough and when it mature s (and the gov could move that post) the best I can do is put it in an annuity (for who knows what lousy rate) and get at best a sniff of it once a year

Where have you been?

It has not been necessary since 2006 to purchase an annuity. Further new rules from April 2015 will also allow you to withdraw what you like each year from your pension pot.

jamesd

As jem16 wrote, buying annuities hasn't been required since Alternatively Secured Pensions were introduced in 2006. Developments since then have included fewer restrictions via Capped Income Drawdown and Flexible Drawdown. From 6 April 2015 you can even take out the whole pension pot at once or in pieces from the time you reach 55, though that'll probably increase to 57 around 2028, depending on just when the plan to have that increase happens and what it says in detail.

gadgetmind

JethroUK wrote: »

get at best a sniff of it once a year

As others have said, you'll (probably!) get 25% tax free to kick things off, and then plenty of flexibility. However, don't sniff at the sniff you'll get from an annuity, as it's a sustainable sniff that'll last as long as you need it to.

atush

I am pretty sure you had another post about this and I expalned the math, but let me try again?

I am going on the assumption your employer puts in 2x what you do. If they dont, just adjust.

If you put 100 into an ISA. You have 100. Sure you can get your hands on it, but so can your creditors, the courts, and even the govt (who if they can change pensions can also change Isas?).

Of you put 100 into a pension, you get your 100, plus 25 from the govt, plus 200 from your employer. That means your pension holds 325 at a cost to you of just 100.

No Brainer!

NYGiants

Maximise your employers contribution first, and put any additional cash into an ISA

Loughton_Monkey

NYGiants wrote: »

Maximise your employers contribution first, and put any additional cash into an ISA

I wouldn't disagree with this until such time as you are knocking on the door of higher rate tax [which the current government has sadly been lowering in real terms]. Once you get into this bracket, you should switch back to pension to get the added relief.

redux

Loughton_Monkey wrote: »

... knocking on the door of higher rate tax [which the current government has sadly been lowering in real terms].

That might be arguable.

You may feel that the band at 20% has narrowed, but that's mostly because an increased zero band has been taken off the bottom. Because of that larger zero band, people on 40% tax have had a cut much like basic rate tax payers.

kidmugsy

Jethro is just a leg-puill, I suspect.

gadgetmind

redux wrote: »

Because of that larger zero band, people on 40% tax have had a cut much like basic rate tax payers.

As the personal allowance has grown, the 20% band has been deliberated shrunk to prevent 40% tax payers from benefiting.

Those who have lost their personal allowance get doubly shafted, or perhaps even triple!

rpc

redux wrote: »

Because of that larger zero band, people on 40% tax have had a cut much like basic rate tax payers.

There has been a small tax cut for the 40% band (I think the last increase in personal allowance didn't have a corresponding reduction in the 40% threshold).

However, because most of the allowance increases have been accompanied by a cut in the size of the 20% band, far far more people are in the 40% band.

The starting salary for the 40% band has reduced by about £1,000 over this parliament. That puts a lot more people on the marginal 40% rate.