Pension vs ISA stick thread link plz?

ms_dhoni

Hello,

Looks like main sticky threads been updated and does not contain the link to Pension vs ISA (very informative) thread, if you have the link, can you please share?
Google results have thrown show many threads, its link finding a needle in a haystack

Thanks!

dunstonh

The pension vs ISA sticky was very informative but I suspect that the bulk of it is out-of-date now.  Certainly, all the posts from before 2015 (which is the bulk of the thread) are now obsolete and have the wrong information for 2021.

ms_dhoni

Yes that would make sense, Thanks for the clarification.

jamesd

Some critical things to know are:

1. The pension freedoms from 2015 removed limits on how much ordinary people can take out of pensions (the GAD limit is gone) so they are now highly suitable for any required amount of income including bridging from retirement to state pension age when you may need to draw more than your long term need. The annuity buying requirement went away when Alternatively Secured Pensions were introduced in 2006 but the message finally got through with the 2015 changes and annuity buying plummeted, in part due to the then and current low pay rates. Income drawdown is the replacement, with state pension deferral offering an excellent alternative for many - 5.8% increase per year of deferral with inflation increases..

2. ISA and pension can have the same mainstream investments but pensions can allow some more esoteric ones, like owning the building where your business is located, if you have one.

3. ISA are accessible but this also makes them count for means tests and legal judgements against you. Pensions are protected from this until you take money out. This can be a critical concern for the Lifetime ISA if you use it for retirement instead of home purchase.

4. Penson access age is currently 55 rising to 57 in 2028. ISA accessible any age except Lifetime ISA at 60 unless you pay a 25% penalty on what you withdraw. Inherited pensions have the day of birth as minimum access age.

5. You can have as many ISAs and pensions as you like, though the only one of each type rule limits how fast you can create ISAs.

6. contribution limits vary, 20k a year for main ISAs, for pensions its pay but employer contributions don't count towards that and in addition there's a 40k annual allowance and rules allowing carry-forward of unused allowance from the previous three years, you need to satisfy both rules.

.7. There's no limit on total ISA value but for pensions there's an extra tax charge on withdrawals above a bit over a million Pounds due to the lifetime allowance. At this sort of level you can buy an annuity paying perhaps 20k a year or use income drawdown of around 50k, including eventually the state pension in that.