pension vs isa for self employed

jennie2503

I am looking for help with what is the best thing, i dont have a pension and i work form home, my income changes monthly and so i cant plan a def figure each month ( although could possibly do £80 a month no more) so i need to know what is best pay into a pension or put it into a isa to save for my old age, i am 35 this year as well

I have looked on line and i am getting more confused, i looked at getting a pension advisor but he wanted over £300 just to talk to me!

please help

kidmugsy

(i) Don't act until after the Budget on March 16th, since you are likely to gain from any reforms announced then (unless you are a higher rate taxpayer).

(ii) While you await reforms, or announcements of reforms, I suggest that you save in a high interest current account, combined perhaps with a high-interest regular saver. One you've accumulated a useful pot of savings, you can reconsider contributing to a pension.

BananaRepublic

The government web site will give you good clear advice on pensions and ISAs.

A pension has the advantage of the tax back, and with recent reforms you can take the pension as multiple lump sums after the age of 55. You really do need to save as much as you can into a pension when young, so as to benefit from growth. But you also need to invest in a decent fund, otherwise it will barely grow. £1,000 per year is nothing, I'm afraid. Better than nowt, but more is advisable if possible.

An ISA is in my view less attractive than it was, due to pension reforms. You do not get tax back, but the gain when withdrawn is free from CGT, and it can be taken before age 55. It is better if you need to save a lump sum to be withdrawn before age 55, but can depending on circumstanes be useful for saving a lump sum for withdrawal after age 55.

Eco_Miser

Save for a year in a regular saver (see this thread for details) at 5 or 6%, pay-in is usually variable each month between £25 and the maximum. Then pay the lot into a pension when it matures, and go again for the next year. Or find a pension provider who will accept variable monthly payments.

xylophone

In your circumstances, a stakeholder might suit.

http://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/


https://www.moneyadviceservice.org.uk/en/articles/stakeholder-pensions

TraySelect

Saving into an pension or ISA are both options [rather than either/or], when you get the cash flow coming through.
I'm self-employed, and over the years have paid monthly into a pension pot, then put bigger sums in at the end of my tax year if I had the surplus. I've saved into ISAs too, though they seem less attractive now.
Whatever you can save, save it, and within a tax-beneficial arrangement.
Although you didn't ask about mortgages, I wish I'd started overpaying on my mortgage earlier, as that would have cleared that debt off sooner, and allowed me to divert more to retirement savings.