Starting a private pension - when is 'too late'..?

Andy_L

Charlton_King wrote: »

Surely there is a significant difference between contributions to a pension and those to, say, an investments ISA... or does HMG come along and turbocharge one's ISA contributions in the same way, then..?

Pensions are tax free going in but taxed going out (other than the lump sum) whilst ISAs are taxed going in but tax free going out. Which of those is better depends very much on your own situation, although the simple answer is a bit of both is best

bigadaj

atush wrote: »

Contributions to a pension get tax relief on the way on, and 25% TF on the way out. S&S isas get TR on growth within, and pay out tax free (but money going in has been txed.

Rental properties get neither So are very tax inefficient, both growth and income. So you should be able to do better than property with either S&S isas or pensions, depending on what you choose to invest in.

Though the gearing effect of having mortgages on rental properties can mean that may be more profitable.

There's obviously more risk in borrowing but it's why so many people have done well with property, whether that is better than investment depends on the individual case.

atush

Witht he rise in costs going forwards, and the restriction on what is allowed for deductibles re tax in future- means it wont be as good going forwards.

Alan_Cross

Andy_L wrote: »

Pensions are tax free going in but taxed going out (other than the lump sum) whilst ISAs are taxed going in but tax free going out. Which of those is better depends very much on your own situation, although the simple answer is a bit of both is best

Was reading this thread with interest but this stopped me.

In what sense are ISAs 'taxed going in'..? I've never noticed HMG taxing any money I put into an ISA.

AlanP_2

Alan_Cross wrote: »

Was reading this thread with interest but this stopped me.

In what sense are ISAs 'taxed going in'..? I've never noticed HMG taxing any money I put into an ISA.

Contributions to an ISA are from taxed income is what this is referring to.

BananaRepublic

Andy_L wrote: »

Pensions are tax free going in but taxed going out (other than the lump sum) whilst ISAs are taxed going in but tax free going out. Which of those is better depends very much on your own situation, although the simple answer is a bit of both is best

I'm quibbling, because I am sure you realise this, but when you take your pension, the non lump sum part is tax free up to your tax free allowance which is about £11,000 at present. If you take £15,000 a year, then you can have roughly £4,000 as the tax free lump sum, and the rest tax free. This ignores any state pension which will eat into the personal allowance of course.

Alan_Cross

AlanP wrote: »

Contributions to an ISA are from taxed income is what this is referring to.

Yes but any payments made into an ISA would be likewise. The comment - 'taxed going in' -was strange, it seems to me.

AlanP_2

Alan_Cross wrote: »

Yes but any payments made into an ISA would be likewise. The comment - 'taxed going in' -was strange, it seems to me.

I'm confused now - I think you and I are both saying that cash going into an ISA has been taxed already (assuming it has been "earnt"), it is then tax free when withdrawn.

Alan_Cross

As far as I can see it works out as: NEITHER are taxed 'going in' except in the sense that you have already paid tax on your disposable income. HMG gives you tax relief on your pension contributions but not on the proceeds when you cash in. T'other way round for ISAs.

My only headache is trying to work out which the OP would do better by!

fewcloudy

Alan_Cross wrote: »

Was reading this thread with interest but this stopped me.

In what sense are ISAs 'taxed going in'..? I've never noticed HMG taxing any money I put into an ISA.

The money I put into my ISA was earned from my job, and I paid tax on it prior to putting it into my ISA.
The money I pay into my pension is deducted from my gross pay and hasn't been taxed.
Alan L's post is clear to me.