Self employed - ISA or pension

RG79

This has probably come up many times but I'm a little confused about how to plan for my retirement.

I'm 29 years old, self-employed, and I have a little bit tucked away in a PEP and an ISA.

The question is do I go for an ISA or a pension plan as a long term solution. I've read answers to this sort of question before and it's only left me more confused! If I can take it for granted that I'll keep my mitts off my savings, doesn't an ISA make more sense? Or is the difference negligible and therefore I should quit procrastinating and invest in any old thing with the highest savings rate?

Confused...

dunstonh

This has probably come up many times

Yes. so much so we have a sticky at the top of the board to compare ISAs vs Pensions. Take a look at that then follow up any comments you may have.

invest in any old thing with the highest savings rate?

investing and saving are two different things. Cash ISAs are not suitable long term retirement planning vehicles.

EdInvestor

When you retire you get an old age tax allowance.This is going up to 10k a year soon.Pension income up to that level is tax free.Self employed people are only entitled to the basic state pension, not S2P, so assume that half of that 10k allowance is taken up by the BSP.

It makes sense to invest in a pension which will give you income of another 5k. When you save in a pension you get tax relief up front, contributed into the pension.But you pay tax on the pension income after you retire.

However, this 5k pension would be tax free, within your allowance so you wouldn't have to pay the tax relief back.

You can contribute up to 3600 a year into a pension regardless of earnings (20% of which is paid by the Govt in tax relief.).Worth doing IMHO.