The MSE Forum will be undergoing some maintenance this evening. As a result, some users may experience temporary performance issues. Please use the Site Feedback board to report anything major. Thank you for your patience.

ISAs v Pensions: The Official Retirement Debate

19596979899101»

Comments

  • dunstonh
    dunstonh Posts: 116,027
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    I get you. I wondered if you meant the popular misconception that because it gets the tax relief that the tax relief with compounded growth will go on to make it more than 25% difference.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • darkidoe
    darkidoe Posts: 1,125
    First Anniversary Name Dropper First Post
    Forumite
    Anyone here taking the filling up the ISA before Pensions method to target early retirement? Just because ISA withdrawal would be more flexible compared to pensions which would have to be locked in till at least 55years of age

    Save 12K in 2020 # 38 £0/£20,000
  • Snakey
    Snakey Posts: 1,174 Forumite
    I'm in the fortunate position at the moment of being able to do both.

    I do feel generally conflicted between quantity and quality - like I ought to grab the tax relief while it's still around because it'll be a better payoff overall, but equally I don't want to have to work beyond 50 or so and I don't want to be skint in between times.

    The big unknown for me personally is what they are going to do with private pension age. The wording of their last statement seems clear but it isn't law yet and I have a concern that they won't just move it from 55 to 57 overnight in 2028 (I turn 55 in 2027 so if they do that I'm safe), but transition it in over the years leading up to that - perhaps keeping it ten years below State pension age throughout. And if they also bring forward the increase in State pension age as well, it could even be 58. So right now I don't know whether I need to amass five years of savings or eight.

    Of course there's no telling what might happen to ISAs between now and then, either.
  • darkidoe
    darkidoe Posts: 1,125
    First Anniversary Name Dropper First Post
    Forumite
    Snakey wrote: »
    I'm in the fortunate position at the moment of being able to do both.

    I do feel generally conflicted between quantity and quality - like I ought to grab the tax relief while it's still around because it'll be a better payoff overall, but equally I don't want to have to work beyond 50 or so and I don't want to be skint in between times.

    The big unknown for me personally is what they are going to do with private pension age. The wording of their last statement seems clear but it isn't law yet and I have a concern that they won't just move it from 55 to 57 overnight in 2028 (I turn 55 in 2027 so if they do that I'm safe), but transition it in over the years leading up to that - perhaps keeping it ten years below State pension age throughout. And if they also bring forward the increase in State pension age as well, it could even be 58. So right now I don't know whether I need to amass five years of savings or eight.

    Of course there's no telling what might happen to ISAs between now and then, either.

    That's the big factor here. Another factor is that I might not retire here in the UK, and to be honest the whole Pensions things is still very much of a complicated device to get my head totally clear about it.

    Save 12K in 2020 # 38 £0/£20,000
  • dunstonh
    dunstonh Posts: 116,027
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    darkidoe wrote: »
    That's the big factor here. Another factor is that I might not retire here in the UK, and to be honest the whole Pensions things is still very much of a complicated device to get my head totally clear about it.

    In which case, you may wish to check the intended country you may end up in recognises the tax free status of the ISA. Many countries do not and will tax you on it.

    Pensions are no more difficult than ISAs. They both share the same investments and charges and can be run from the same administration platforms. The only difference is the taxation and maturity process.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Paul_Herring
    Paul_Herring Posts: 7,481
    Name Dropper Photogenic First Post First Anniversary
    Forumite
    Snakey wrote: »
    The big unknown for me personally is what they are going to do with private pension age. The wording of their last statement seems clear but it isn't law yet and I have a concern that they won't just move it from 55 to 57 overnight in 2028 (I turn 55 in 2027 so if they do that I'm safe), but transition it in over the years leading up to that - perhaps keeping it ten years below State pension age throughout. And if they also bring forward the increase in State pension age as well, it could even be 58. So right now I don't know whether I need to amass five years of savings or eight.

    Or thirteen. Don't forget that they mooted having private pension age move to five to ten years before state pension age.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Snakey
    Snakey Posts: 1,174 Forumite
    That does look like scaremongering - lots of "could"s and "up to"s in there. Also it was before the election. I suspect that the Conservatives are generally in favour of themselves still being able to retire at 55.

    There is precedent, though, for changes to be made at very short notice - so, if there's a change of government in 2020 or even 2025. Part of me thinks that surely if I get to x age without it having happened then I'm safe because "they wouldn't" just bring it in overnight... but that's probably not the case!

    Latest guff from the Telegraph is that the annual allowance will be drastically reduced, anyway. Although I think that at this point they're just pulling possibilities out of their backsides in order to have something to talk about, part of me would almost like this to happen because it would force my hand - I'd have to save less in my pension and therefore have more resources (albeit post-tax ones) to put towards savings and mortgage repayments which would all help me pre-55/57/108.
  • atush
    atush Posts: 18,719
    Name Dropper First Anniversary First Post
    Forumite
    50 is pretty young to retire, and you could live to 100. So you could run out of money?

    So id be looking at filling BOTH pensions and isas.
  • Paul_Herring
    Paul_Herring Posts: 7,481
    Name Dropper Photogenic First Post First Anniversary
    Forumite
    atush wrote: »
    So id be looking at filling BOTH pensions and isas.

    Which anyone who has the sense to be planning for their retirement should be (and in all likelihood has been) doing anyway.

    I'm still trying to fill the gap between 50 and 55 after the last jump, and am currently at around 53. Might make it to 52, 51's unlikely. Not ideal, but still....
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
  • Snakey
    Snakey Posts: 1,174 Forumite
    atush wrote: »
    50 is pretty young to retire, and you could live to 100. So you could run out of money?

    So id be looking at filling BOTH pensions and isas.
    Hell yeah. I keep reading that when it comes to pensions a 4% withdrawal rate is probably OK and 3% should be fine, so short of a massive stock market crash at exactly the wrong moment I shouldn't run out of money in "actual retirement" i.e. post-pension-grabbing-age. It's the years between giving up the job and the pensions door clicking open that make me curse the government's refusal to make their minds up.

    Can't speak for anyone else but I use "retire" as shorthand for "not have to work as a full time employee any more". The three tines of my savings fork are pension, ISA, and paying off the mortgage, but I am also trying to build up a robust freelance business - partly because of the above worry. If I could earn around the personal allowance my bills (sans mortgage) would be more than sorted and I'd only need the ISA for mad money or disaster.

    £12k a year wouldn't require much actual work, at freelance day rates (a day or two per month) so I don't think "retire" is thoroughly misleading, but I do appreciate it's not strictly the same. :)
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.4K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards