Save into an ISA or small pension pot?

RipleyG

I'm very surprised to see that comment from an IFA. 

Where management or platform fees are charged as a percentage of the total pot, those fees obviously reduce any growth - though don't wipe it out unless the growth is lower than the percentage charged. 

But platform fees can also be a fixed pound amount per year/month or "x% subject to a minimum £y". And there can be additional charges per trade/deal. The OP has also mentioned they are seeking to add to a occupational pension pot where they are no longer an employee. Depending on the specifics of the pension scheme, they may only be able to do this if the whole pot is moved from the ringfenced section where fees are paid for or subsidised by the employer pays into a standalone section where unsubsidised fees are charged on the total pot.

In any of those scenarious the extra charges, or that increase in fees on the total pot, could wipe out or significantly reduce the growth on a small amount of added funds over a shortish period of time. 

wjr4

RipleyG said:

I'm very surprised to see that comment from an IFA. 

Where management or platform fees are charged as a percentage of the total pot, those fees obviously reduce any growth - though don't wipe it out unless the growth is lower than the percentage charged. 

But platform fees can also be a fixed pound amount per year/month or "x% subject to a minimum £y". And there can be additional charges per trade/deal. The OP has also mentioned they are seeking to add to a occupational pension pot where they are no longer an employee. Depending on the specifics of the pension scheme, they may only be able to do this if the whole pot is moved from the ringfenced section where fees are paid for or subsidised by the employer pays into a standalone section where unsubsidised fees are charged on the total pot.

In any of those scenarious the extra charges, or that increase in fees on the total pot, could wipe out or significantly reduce the growth on a small amount of added funds over a shortish period of time. 

As I said, most pensions have percentage charges. How will you lose all your pension if it’s based on a percentage? Unless you’re sitting in cash and gaining no interest at all. 

RipleyG

wjr4 said:

How will you lose all your pension if it’s based on a percentage? 

I've not suggested all the pension will or could be lost - just that growth on the amount invested could be reduced or negated by the fees incurred. 

kempiejon

RipleyG said:

Don't forget to check what the fees will be on the pension. With only a few years to go, you might find the fees reduce/wipe out any growth in value and a fixed rate cash ISA with no fees might be a better bet. 

One can hold similar assets in ISA/Pension. Cash ISAs are generally free, one can have cash in pensions, pensions charge a fixed fee or a %age to hold.

I've looked at the numbers and being able to defer tax at basic rate or better and take 25% of that tax free, far outweigh any fees for dealing or holding in a pension wrapper. As mentioned one could hold gilts or comparatively cash like investments in a pensions making it a fair comparisons with cash ISAs. I can't see a fixed rate cash ISA available that would better that return. I see rates around 5% for cash ISAs but don't study the tables so might have missed the best returns, similar returns from cash are available in pensions.

Albermarle

Depending on the specifics of the pension scheme, they may only be able to do this if the whole pot is moved from the ringfenced section where fees are paid for or subsidised by the employer pays into a standalone section where unsubsidised fees are charged on the total pot.

My understanding is that this is not allowed anymore and you should keep any special discounts, although it maybe depends on the exact type of pension.
I had 5 occupational DC pensions and that was the case for all of them + these types of pensions typically have no trading fees, as they only offer OEICs.