Is it worth getting a pension?

[notsureatall]

I have not had a pension for 4 years since going self-employed and need to sort something out. Before this I have about 9 years' worth of a final salary pension scheme so it's not a total disaster.

But is it worth getting a pension? Or would I be better getting a stocks and shares ISA?

[mrsshackleton]

are you a higher tax earner, if you are it's worth it as (for now) the govt will top it up. If you're on lower tax, probably best to go for an ISA.

Actually, either way first use up your ISA allowance before looking in to pensions if any's left over

[cjlb]

Swings & roundabouts. You can't dismiss a pension simply because you are not a higher rate tax payer.

With a pension, you get tax relief on your payments based on the rate of income tax you pay. So for a basic rate tax payer, a £100 payment in to a pension plan will only cost you £80 and HMRC pays the rest. However, when you retire, income from your pension pot is taxable.

Conversely, with an ISA, you don't get any tax relief on your payments - a £100 contribution costs you £100. However, when you use your savings to produce an income, the income is tax free (under current rules).

Both pensions & ISAs grow virtually tax free and their is no CGT on either.

It also depends on how much you are looking to save. With an ISA, the maximum is £10,200 a year, while with a pension, you can contribute up to 100% of your income, subject to the annual allowance of £255k !

Another aspect to consider is how good you are at saving and not touching the money. With the ISA, the capital would be available to you at any time which may be too tempting. With a pension, it can only be used to provide you with an income when you retire (apart from the 25% tax free cash from the pension fund) and you can't take any benefits until you are 55 years old.

How good your 9 years of pensionable service depends on the scheme you were in. If one of the public service schemes, they are 80th schemes, so your pension would be 9/80ths of your final salary.

Either way, it would be worth speaking to an IFA for advice about where to invest. Avoid asking a bank for financial advice.

[Vermdum]

It may be worth takeing free financial advice from an advisor.

Bare in mind that banks have now an order to shore up billions as security against future problems. This means that they are VERY willing to chat to people who may be investing steady supplies of money over the next few years (such as a pension fund)

[IMoveTheStars]

Yikes, I'm so glad I have mine sorted. (extremely fortunate to have a final salary pension, and I'm ^never leaving that job)

Yes, it's worth it. I thought our house would provide, but worried that's not going to be the case now.

[Lizcat]

Other benefits of a pension as a self employed person is that if you have a SIP your pension can own your business premise and you pay your pension rent. You need a really good IFA to help you organise this, but is possible.

[Patienceobtainsallthings]

I am soon to be self employed have no pension in my late 30's and soon to be divorced ,was looking at stake holder pensions but wondered if an ISA makes more sense .Realistically investing £80 -£100 per month.

[UltimateNachos]

I also badly need to sort my pension situation out. Any suggestions on how I could find a good IFA?

[Xenia]

And look at how much you have to invest. If you don't save the state gives you a guaranteed minimum income in retirement. If you do save you don't get that which is pretty rotten. If your pension will yield a lot more than that and you intend to retire (my father worked full time to 77, my children's other grandfather still works at over 80 and I don't plan to give up work unless I have to) then it could be worth it but they change the rule all the time and raid the pension funds so you might be better just saving money up which you don't touch.

You can now have chunks of your pension taken away if you've too much in there. They also just changed the rules so that you can't draw it at 50 just 55, In other words Governments withoutm uch thought change things all the time whic makes people lose faith in pensinos.

[BeenBeta]

The history of private pensions has been an utter disaster in this country. High charges and poor investment performance have devastated private pensions and will not pay out anything like a decent pension.

My personal view is pay off all your debts first. Then put a pot 6 months of salary in a National Savings Income Bond for a rainy day reserve. Then use up your ISA/PEP allowance by putitng into a self select ISA where you yourself buy the shares yourself. I suggest you just put an equal amount into a broad spread of FTSE 100 shares accross the different industrial sectors. I would not use an investment mananger or be tempted investing in a fund or anything like that. It just eats up investment returns with charges. Just do it yourself and dont try and second guess the market but just put an equal amount in each month. Occassionally rebalance the fund by selling some of holdings that have become very large and also sell out anything that is no longer a FTSE 100 share. Reinvest any cash raised from sales and dividends in new shares.

If you have anything left over you could go for a Self Select SIPP again just investing in a broad spread of FTSE 100 shares by yourself as above.

I use Hargreaves Lansdown for my self select SIPP and they do PEP/ISA as well.

[foreverastudent]

It depends how much debt you have. It makes no financial sense to be making less from savings, whether pension or otherwise, than you are paying out in debt. This includes mortgage payments. If you have spare cash overpay your mortgage first.

[Xenia]

I have the same views as BB (and forever).

[Patienceobtainsallthings]

Many thanks .Will look into all my options ,i have no debt so prob opening an isa is a good place to start.Can i do all my share dealings myself or do i need an agent BB?Wonderful advice thankyou once again !

[BeenBeta]

Patience - If you go to your bank or Building Society and ask for a Self Select Share ISA. That is different from a CASH ISA which is just a cash deposit account. The bansk and bulding societies pretty much all now do a Self Select as well as Managaged Equity ISA and CASH ISA so make sure you get the one you want NOT the one they push at you. Once you have set up your Self Select Share ISA you can put £10200 in per year and buy shares with that.

You just ring them up (or go online) give your password, tell them what you want to buy and they buy the shares for you and charge a commission of around £25 (some places less and some places more) per transaction. I have mine through First Direct because I bank with them but only for convenience.

Lots of banks do them, stock brokers and people like Hargreaves Lansdown I mentioned earlier. Share Registrars that actually record and administer who owns shares in the UK like Capita also run Self Select ISAs too. Shop around for a reasonable commission rate and go with a financially sound firm.

[MrCjlB]

www.unbiased.co.uk/

is all you need