Dormant Pension!

Linton

Your £1000 in a pension is grossed up to £1250 by HMRC. When you withdraw the money you get 25% tax free, paying tax on the rest. Assuming you pay basic rate tax whilst contributing and whilst withdrawing that's a saving of 20%X25% = 5%. You cant access a pension until you are 55.

With an ISA you get nothing extra paying in but dont pay tax on withdrawals. You can withdraw money at any age.

Apart from that they are much the same, which access to much the same investments.

xylophone

http://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/tax-relief-and-contributions

http://www.telegraph.co.uk/finance/personalfinance/investing/isas/9881234/Isa-or-pension-which-is-the-better-way-to-save.html

Tokyo_8

OK - I'm slowly getting my head around this pension situation!
One question, lets say I have an amount in my Standard Life
personal pension and the same amount in stocks and shares ISA.

when it comes to retire I draw an income from the two funds at 5%,
without touching the capital - I kind of understand this is how both would work.

Say I receive some terminally bad news - I think with regards to the ISA, I still take an income form the ISA, but I can start eating into the capital and run the whole isa account down to 'zero'

But I'm under the impression, with the pension, that I can only take the income (interest on the capital) and not touch the capital. I'm under the assumption that I will never get my hands on this capital.

Can someone just point out nicely my naivety with regards to this whole pension issue!

Many thanks as usual for any responses!

Also, any comments on what a SIPP is (in layman's terms) would be greatly received as well

Thanks!

xylophone

You could draw income or capital from your pension.


https://www.standardlife.co.uk/c1/guides-and-calculators/lets-talk-about-pension-flexibility-today.page

https://www.hl.co.uk/free-guides/free-guide-to-sipps?SQ_DESIGN_NAME=ext&theSource=PCGSU&Override=1&adg=G+SIPPU+WHT&gclid=CPKDyLffjMQCFQMewwodcWMAyw

Linton

Tokyo_8 wrote: »

....
Also, any comments on what a SIPP is (in layman's terms) would be greatly received as well

...

A SIPP is very much like an S&S ISA but with different rules for moving money in and out.

jem16

Tokyo_8 wrote: »

But I'm under the impression, with the pension, that I can only take the income (interest on the capital) and not touch the capital. I'm under the assumption that I will never get my hands on this capital.

You're under the wrong assumption.

Assuming Defined Contribution pension which it appears to be, you have been able to utilise Drawdown since April 2006 although amounts were capped unless you had other pension income to use Flexible Drawdown.

From April 2015 you will be able to draw as much or as little as you wish.

Also, any comments on what a SIPP is (in layman's terms) would be greatly received as well

A SIPP means a Self Invested Personal Pension. It is merely a tax wrapper into which you can put investments. With any pension wrapper you get tax relief going in and 75% of it is subject to tax going out.

An ISA is another tax wrapper into which you can put investments. With this wrapper you invest using already taxed money. There is no tax relief going in and no tax payable on withdrawal.

So basically the only difference between the ISA and Pension wrappers is how the tax is handled. Other than that they are identical as to the types of investments you can place inside them.