Pay into pension or ISA?

Rip_Uk · 11-14-2006, 09:41 AM

This question is really intended at UK users I suppose. Anyway, I have been paying £10 a week into a pension for three years now but I have been told it would be better to pay this money into a high interest savings account such as an ISA. Is it better to do it that way and why..?

**apj101** · 11-14-2006, 10:19 AM

Quote:

Originally Posted by Rip_Uk

This question is really intended at UK users I suppose. Anyway, I have been paying £10 a week into a pension for three years now but I have been told it would be better to pay this money into a high interest savings account such as an ISA. Is it better to do it that way and why..?

no, pension saving remain the best primary solution, your tax will be paid back at source, and all earned interest is tax free. Investments in ISAs are not tax deductible... only interest earned on the investment is tax free.

Rip_Uk · 11-14-2006, 11:42 AM

So when I collect my pension it is tax free and I will get paid tax back, and with ISA's they tax you on the amount but not on the interest?

**apj101** · 11-14-2006, 12:01 PM

Quote:

Originally Posted by Rip_Uk

So when I collect my pension it is tax free and I will get paid tax back, and with ISA's they tax you on the amount but not on the interest?

hehe, no its like this.

Pension
You earn cash, and tax is deducted from your payslip. When you contribute an amount to your pension (say £100) the HMRC calculate how much tax you had paid on that amount (say £22 if your a standard rate tax payer) and pay that amount of tax back to you (well actually they pay it back to you pension fund), so your pension fund gets £122.
Any interest earned on the £122 is tax free

ISA
You earn cash, and tax is deducted from your payslip. When you contribute an amount to your ISA (say £100), thats all the ISA gets, there is no tax to recieve from the HMRC. So all your ISA gets £100
Any interest earned on the £100 is tax free

The reason people prefer ISA's is because you dont have to wait until your retired to get at it

. Also ISA limits are much higher within restrictions on the amount you can pay per year limited to £3000 cash. However due to recent A day reforms there is no limit on pension contribution (well it's about £1-2million)

Rip_Uk · 11-14-2006, 12:26 PM

thanks apj101.

SirKenin · 11-14-2006, 01:34 PM

If it's a government pension plan, don't bother because the money won't be there when you retire anyways. If it's a private pension plan, then yeah, what apj said. Only problem is if the company goes under... then you lose everything. At least with ISAs your earnings are secured. Having to pay tax is better than not getting any money.

**apj101** · 11-14-2006, 01:46 PM

Quote:

At least with ISAs your earnings are secured.

how so? There is no security for any ISA plan.

Quote:

If it's a government pension plan, don't bother because the money won't be there when you retire anyways.

If by government you mean civil service/army/et al then you're wrong, those are the safest schemes running
The only high profile pension collapses have been private sector

And the risk of pension fund collapsing is overblown by daily mail readers

.

SirKenin · 11-14-2006, 03:54 PM

No, by government I mean the pension plan for ordinary working class citizens.

**apj101** · 11-14-2006, 03:57 PM

Quote:

No, by government I mean the pension plan for ordinary working class citizens.

there is no such thing as that in the UK, unless you mean the National Insurance contribution, but that i a legal tax, and cant be avoided.... should give you a pension of about £5

(basically its so low it not worth considering)

Rip_Uk · 11-14-2006, 04:02 PM

well It is a private pension that only I contribute to (not the company I work for) and the pension scheme is with HSBC Bank.

11-14-2006, 09:41 AM	#1 (permalink)
Rip_Uk Diamond Member Join Date: Jul 2005 Location: West Midlands, UK Age: 23 Posts: 1,526	Pay into pension or ISA? This question is really intended at UK users I suppose. Anyway, I have been paying £10 a week into a pension for three years now but I have been told it would be better to pay this money into a high interest savings account such as an ISA. Is it better to do it that way and why..? __________________ Antec Three Hundred Samsung SM226BW 22" TFT Msi K8n Diamond Sli AMD 64 4400+ X2 With AS5 BFG 7950 GT 2GB (2 x 1GB) OCZ Platinum PC3200 320GB + 300GB Maxtor Diamondmax SATA NEC ND45550 16x DVDRW +/- & DVDRAM Enermax Liberty 620W SoundBlaster Audigy 2 ZS

11-14-2006, 11:42 AM	#3 (permalink)
Rip_Uk Diamond Member Join Date: Jul 2005 Location: West Midlands, UK Age: 23 Posts: 1,526	So when I collect my pension it is tax free and I will get paid tax back, and with ISA's they tax you on the amount but not on the interest? __________________ Antec Three Hundred Samsung SM226BW 22" TFT Msi K8n Diamond Sli AMD 64 4400+ X2 With AS5 BFG 7950 GT 2GB (2 x 1GB) OCZ Platinum PC3200 320GB + 300GB Maxtor Diamondmax SATA NEC ND45550 16x DVDRW +/- & DVDRAM Enermax Liberty 620W SoundBlaster Audigy 2 ZS

11-14-2006, 12:26 PM	#5 (permalink)
Rip_Uk Diamond Member Join Date: Jul 2005 Location: West Midlands, UK Age: 23 Posts: 1,526	thanks apj101. __________________ Antec Three Hundred Samsung SM226BW 22" TFT Msi K8n Diamond Sli AMD 64 4400+ X2 With AS5 BFG 7950 GT 2GB (2 x 1GB) OCZ Platinum PC3200 320GB + 300GB Maxtor Diamondmax SATA NEC ND45550 16x DVDRW +/- & DVDRAM Enermax Liberty 620W SoundBlaster Audigy 2 ZS

11-14-2006, 04:02 PM	#10 (permalink)
Rip_Uk Diamond Member Join Date: Jul 2005 Location: West Midlands, UK Age: 23 Posts: 1,526	well It is a private pension that only I contribute to (not the company I work for) and the pension scheme is with HSBC Bank. __________________ Antec Three Hundred Samsung SM226BW 22" TFT Msi K8n Diamond Sli AMD 64 4400+ X2 With AS5 BFG 7950 GT 2GB (2 x 1GB) OCZ Platinum PC3200 320GB + 300GB Maxtor Diamondmax SATA NEC ND45550 16x DVDRW +/- & DVDRAM Enermax Liberty 620W SoundBlaster Audigy 2 ZS

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11-14-2006, 01:34 PM	#6 (permalink)
SirKenin banned Join Date: Aug 2006 Posts: 4,711	If it's a government pension plan, don't bother because the money won't be there when you retire anyways. If it's a private pension plan, then yeah, what apj said. Only problem is if the company goes under... then you lose everything. At least with ISAs your earnings are secured. Having to pay tax is better than not getting any money.

11-14-2006, 03:54 PM	#8 (permalink)
SirKenin banned Join Date: Aug 2006 Posts: 4,711	No, by government I mean the pension plan for ordinary working class citizens.

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