Personal pension or ISA?

Downdog23

I am paying into a workplace db pension scheme but would like an additional investment. I have an old Scottish Widows personal pension and also a Halifax ISA that I haven’t paid into for years but I could start paying into one of them again, or look for different product. My workplace offers AVCs but they are not salary sacrifice so I don’t think they offer an advantage over a personal pension? I want to start saving somewhere asap but not sure what the best investment would be. Any tips? 

dunstonh

 have an old Scottish Widows personal pension and also a Halifax ISA that I haven’t paid into for years but I could start paying into one of them again,

Both would likely be akin to buying tape recorder to play music.

My workplace offers AVCs but they are not salary sacrifice so I don’t think they offer an advantage over a personal pension?

AVCs are largely old hat.  However, a few gems are out there (those that can be used in conjunction with the main scheme to diver the tax free cash to being a good option).  If its public sector, then you have other options with many fo the roles too.

Personal pension or ISA?

In respect of that bit, pension trumps ISA in most scenarios as both can offer the same investments at the same cost meaning only the taxation and process is different.

Downdog23

Thank you! I’ll look into personal pensions.

Dazed_and_C0nfused

Downdog23 said:

Thank you! I’ll look into personal pensions.

If you are a basic rate taxpayer now and expect to be in retirement (and the basic rate remains 20%) then you get a 6.25% advantage from a pension compared to an ISA.

ISA = £100 in (no tax relief) and £100 out (no tax paid)

Pension = £100 in becomes £125 with basic rate tax relief.  When taken out that £125 out is £31.25 TFLS plus £93.75 taxable income on which £18.75 tax is due.  End result is £31.25 + £93.75 - £18.75 = £106.25 out

Albermarle

Downdog23 said:

Thank you! I’ll look into personal pensions.

Starter for 10

Pensions & Investing - MoneySavingExpert

Once you have opened a new pension, you can consider transferring your old SW pension into it.
Probably the charges will be lower ( but needs checking), and there will be more options available when you come to withdraw from it.

af1963

Also depends on when you think you may want to access the money. Pension will not be available until age 55 (currently) or 57 (changing soon) or potentially later if you're younger. 

It can be helpful to have some ISA or other savings available if you might need to access it earlier. 

And you can move money later from the ISA to the pension, contributing up to your full annual earnings and getting the tax relief, if you decide later that you don't need the early access.  But because of the age limits, you can't move it the other way.

Downdog23

Thank you all for this advice! Its really helpful. I have started looking at personal pensions from Vanguard, Wealthify and Fidelity. They seem to be set up as SIPPs, which I think keeps the running costs low, I’m not sure that I’m up to self investing (yet) but maybe the ‘robo investors’ are an option for me. I have noticed that PensionBee is promoted heavily as a good way to combine old pensions into a new managed pot but think the fees are higher? It’s great that providers all have apps and websites which make everything transparent and so much easier to understand than it was 30 yrs ago.  Once I have decided on a new plan I will definitely look into transferring my old SW pension and Equitable Life one.

Downdog23

af1963 said:

Also depends on when you think you may want to access the money. Pension will not be available until age 55 (currently) or 57 (changing soon) or potentially later if you're younger. 

It can be helpful to have some ISA or other savings available if you might need to access it earlier. 

And you can move money later from the ISA to the pension, contributing up to your full annual earnings and getting the tax relief, if you decide later that you don't need the early access.  But because of the age limits, you can't move it the other way.

Yes, I think I will keep the ISA separate for now. Once I have sorted out the PP , I’ll try and get my head around S&S ISAs and maybe improve on the one I’ve got which I know very little about. It was set up originally alongside a mortgage which I later changed to a repayment mortgage but just left the ISA where it was. 

Albermarle

Downdog23 said:

Thank you all for this advice! Its really helpful. I have started looking at personal pensions from Vanguard, Wealthify and Fidelity. They seem to be set up as SIPPs, which I think keeps the running costs low, I’m not sure that I’m up to self investing (yet) but maybe the ‘robo investors’ are an option for me. I have noticed that PensionBee is promoted heavily as a good way to combine old pensions into a new managed pot but think the fees are higher? It’s great that providers all have apps and websites which make everything transparent and so much easier to understand than it was 30 yrs ago.  Once I have decided on a new plan I will definitely look into transferring my old SW pension and Equitable Life one.

With nearly all modern DC pensions you can transfer into and out of them easily. Pension Bee just have good marketing/advertising

For a simple pension with only 5 choices you could have a look at this.
Personal Pension | Private Pension | Legal & General (legalandgeneral.com)

xylophone

Or if going with Vanguard, you could consider the Target Retirement  option?

https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds?cmpgn=PS1022UKBABTR4467EN&s_kwcid=AL!11156!3!589232006629!e!!g!!vanguard target retirement funds&gad=1&gclid=EAIaIQobChMIspr0_oblgQMVKoBQBh2xHA62EAAYASAAEgKZpfD_BwE&gclsrc=aw.ds

Downdog23

Yes this looks like a good option for me, I think a ready made portfolio would be better than a self invested one for me at the moment - though maybe I will want to manage my own in the  future.