How do I make my money work best for me--invest in pensions or savings?

AllotmentOldLad · 9 December 2023 at 1:53AM

I have to admit I don't really understand the tax relief bit of pension talk, which is why I guess I'm posting this thread. I'm 55 and am only now looking to get my money working more effectively for me. To date I've been looking at ISAs and online savings accounts paying >6% AER. But should I be paying into a pension scheme instead? I currently contribute to my NHS pension scheme at a standard rate of 6.1% of my salary each month. What should I do? Online savings? Max-out my ISA contributions? Start a personal pension? Contribute more to my employer's pension? Numbers talk makes my head spin. Can someone make it simpler for me to understand please?

dunstonh · 9 December 2023 at 10:54AM

But should I be paying into a pension scheme instead?

ISAs and pensions can share the same investment options at the same price. So, the only difference is taxation and maturity process. If you are a basic rate taxpayer then the pension wrapper will beat the ISA wrapper by 6.25% if the full amount of pension draw is at basic rate. If there is any personal allowance available, then the pension is even better. If you die before 75, then pension is better still. And if you are subject to inheritance tax on death, then the pension is better.

I currently contribute to my NHS pension scheme at a standard rate of 6.1% of my salary each month.

You also have the added pension benefit available to you via the NHS. £ for £ that is the best option for income provision in retirement but no good for capital provision.

The best options will depend on what you are trying to achieve. i.e. increase your retirement income = NHS added pension. or increase your capital for use in retirement = defined contribution pension.

Albermarle · 9 December 2023 at 6:24PM

You are asking a lot of questions all at the same time and it is very difficult to answer when we know nothing about you. There are no black and white answers. It all depends on your personal circumstances

One point that stands out is that the NHS pension is excellent and guaranteed. I think normally you can enhance this further by making extra payments?

Another point is that you do not say if you currently have any cash savings ( for emergencies) or any family or a mortgage.

AllotmentOldLad · 9 December 2023 at 7:52PM

Albermarle said:

Another point is that you do not say if you currently have any cash savings ( for emergencies) or any family or a mortgage.

Thank you for your patience. We have cash savings for emergencies, which is why up to now I've been focussed on ISAs and regular savings accounts. So now we have enough savings, it's the extra money I can afford on top I want to work for me. I'm married with one dependent, and we are home owners with no mortgage.