Pensions is it worth it if you only have 10 years until you retire?
Can someone who knows about pensions and tax take a look at the below and tell me if I am missing something?
As a background I live in Jersey. In Jersey we have ITIS (same as income tax in the UK). They recently changed the law here that when you retire, if you don't retire in Jersey or a country with a double taxation agreement with Jersey (which is hardly any), you have to pay 20% tax on the whole of the pension you receive, with no personal allowance applied (the amount you can earn before paying tax), to the government. Cost of Living is out of control in Jersey, groceries costing a extra 25% on average and a studio flat costing £300,000, average 3 bed house now over £1m so aim would be to retire to a country with a much cheaper cost of living.
If I put into a pension £20,000 and in 10 years time, less 1% management fee, assuming a return of 5% my money will be worth £32,252.11. The tax man will take 20% - £6450.42 leaving me with £25,801.69.
If I save the same amount now and pay 13% tax (ITIS rate) my £20,000 becomes £17400 x 5% fixed rate x 10 years = £28,342.77. Allow for tax on the interest earned (I don’t know how to work this out so I’m going for 13% = £1422.56) leaving a return to me of £26,920.21.
I would be better putting it into a savings account by £1,118.52. And have the freedom to go wherever I want and take out the money without some pension company holding onto it forever while they mess around (took me 1 year to move my Opted Out Aviva pension (from when I lived in the UK) to Jersey because they kept losing the forms).
What am I missing here as it seems like a no brainer.
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