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Pensions V's ISA Contributions
Akifox
Posts: 1 Newbie
Hi, I'm 50 years old and a 40% tax payer and considering take out a Stocks/Shares ISA or would I be best to increase my works pension contributions? I aim to retire when I'm 60. Would the tax benefits of increasing my contributions outweigh ISA returns?
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Comments
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Pension will usually win, especially if you have any salary sacrifice option or further employer matching contributions, but even without those there'll typically be a benefit, via the tax-free element of pension withdrawals.0
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40% tax relief on pensions is very generous and you should take maximum advantage of it.
If you have the same/similar investments in a pension or an ISA, they will grow/shrink exactly the same.
Many 50 year olds who are 40% taxpayers, raid their savings to add more to their pension in the last few years before retirement, to make maximum use of the higher rate relief.
Caveat is that you can not get more higher rate relief than higher rate tax you are actually paying.1 -
As Albermarle says, you can choose to invest your pension inside the pension wrapper in whatever investments you like, subject to your employer scheme rules which might place some limits on the selection of investments available. However the 40% tax relief is likely to far outweigh any micro management of the investments0
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£20,000 into an ISA will cost you £20,000Akifox said:Hi, I'm 50 years old and a 40% tax payer and considering take out a Stocks/Shares ISA or would I be best to increase my works pension contributions? I aim to retire when I'm 60. Would the tax benefits of increasing my contributions outweigh ISA returns?
£20,000 into a pension will cost you £12,000
At 60, you will have 6-7 years of personal allowance to use up. So, you can draw over £16.5k a year from the pension tax free.
Pension trumps ISA.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.1 -
Assuming no other income.dunstonh said:
£20,000 into an ISA will cost you £20,000Akifox said:Hi, I'm 50 years old and a 40% tax payer and considering take out a Stocks/Shares ISA or would I be best to increase my works pension contributions? I aim to retire when I'm 60. Would the tax benefits of increasing my contributions outweigh ISA returns?
£20,000 into a pension will cost you £12,000
At 60, you will have 6-7 years of personal allowance to use up. So, you can draw over £16.5k a year from the pension tax free.
Pension trumps ISA.Mortgage free
Vocational freedom has arrived0
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