Stakeholder Pensions or where next

ard123en

hi folks

im now a money saving addict !!!!!

im trying to decide if a Stakeholder Pension is right for me

since getting myself out of credit card hell ive continued to live in the same way just putting the money into savings instread

ive evough money in cash isas and savings accounts to last me at my current budget for 2 years, and will in 2 months maxed my mini stocks isa also am doing this year save as you earn at work 250 per month ( not bad for a standard tax payer)

I am now not a house holder but would like to be in the future need a house price crash to afford the replayments ill never live out of my means again

I am also unsure if ill live in the uk when i finish work as most of my family live in africa it mybe a poss to move out there as living expence is less (and it will be alot warmer on my old bones )

Any ideas ?

ard123en

dunstonh

Mod should move this to the pension/retirement section....

Pensions offer tax relief on contributions and charges on pensions are generally lower than ISAs (for equivalent funds). However, the maturity of a pension currently requires you to purchase an annuity with at least 75% of the fund value. This may or may not be an ideal situation for you. As time goes on, the options on what you can do with the maturity have been getting better and who knows what it will be in the future.

The problem with planning for something that is long term is that things will change a number of times before you get there. Next April sees the 3rd major change to pension legislation since 1988. At that rate, how many more changes are there likely to be before you hit retirement? So, ideally a combination of savings vehicles are suitable. ISAs and Pensions being the main two.

If you move abroad, there are proceedures in place to sort transfer pension funds if required. Again, by the time you get there, things could be different.

So, a pension may well be suitable. It is designed to provide retirement income and if you are looking to provide an income in retirement, it fits the job. However, how much you put in it and how much you put aside for next years ISAs (perhaps MAXI instead to offer better potential over the long term) will depend on how much, how long and how you personally feel.

ard123en

its the 75% lock in which turns me off pensions would like my son/family to have the money when im dead and gone not an insurance company

dunstonh

ard123en wrote:

its the 75% lock in which turns me off pensions would like my son/family to have the money when im dead and gone not an insurance company

Very true. However, the income from the annuity purchase would be higher than, say, ISAs. Partly due to the tax relief giving a higher end fund value and partly due to annuity rates being higher than interest rates.

If you ignore growth (because that is unknown and if you put it in the same place with an ISA or a pension it will be the same anyway), and take the pension at 65 and take max tax free lump sum, the equivalent income is just over 10% p.a. Guranteed income as well.

You can add guarantee periods of 5 or 10 years to the annuity and there are alternative options to taking an annuity (some of which are coming in or being modified from next year). Also under the triviality rules, even if you do not want to use a pension, you can still use it for small amounts and get 100% tax free lump sum back on retirement.