Is it best to put money into pension or ISA

[whatisbesttodo]

I am 45, my husband recently received some inheritance and has given me £35k to top up my pension.
I have been reading but I am not much clearer…is it best to put this in my pension , which is the People’s Pension, or save in an ISA?

I am worried if it disappears into my pension then it is locked in until retirement, whereas an ISA can be accessed more easily if needed before retirement age.

My other concern is if anything happens to me before pension age that money isn’t recoverable, whereas if it is in an ISA my husband/kids can access it.

Any idea which would give the best returns or which is the most sensible thing to do.

I could split it 50/50 too, I suppose and put half in each!

Thanks for any advice anyone can offer.

I'd put it in an ISA, for the reason you've mentioned.

The main advantage of a pension is you're not taxed on contributions. You already have the money tax free so no saving there, and there's much more flexibility with an ISA

How much income do you personally have coming in? If you are paying income tax, it is worth putting it into a pension for the tax relief but only up to that point. Otherwise put it in an ISA.

Thanks, I currently learn approx. £45K and that is likely to remain the same as there’s no progression to be had, as such.

Why do you think the money is not recoverable if something happens to you before pension age.

@DryIceyou can still get tax relief from money put into a pension from an inheritance/gift up to 100% of your earnings.

Op for flexibility I would put 20k into a S&S ISA if you haven’t already used this years allowance and the rest into a pension. That way you get the ability to access some of it if you need to but also get a £3750 top up in the pension.

If you want best returns then £35000 would attract £8750 tax relief but the money will be locked away till 57.

Pension pots do get paid out to beneficiaries if you die before retirement. Make sure you’ve nominated a beneficiary with your scheme. Sometimes it’s up to the trustees to have final say about who it goes to, but they will take your wishes into account.

What is a people’s pension?

are you talking about topping up credits for state pension or a private pension??

I’m not sure what you mean by a people’s pension - a SIPP?

What other pension provisions do you have? Can you make additional voluntary contributions to your work pension? If so, this may be a good option.

have a look at the AJ Bell and Vanguard websites. They have some useful information and guidance and offer both SIPPs and ISAs with low charges.

Thanks all

The People’s Pension is the name of my private pension provider, not the state pension.

I think anything I put in as AVC they claim extra from the government if not done through work (I do make a small AVC through work payroll too, which I try to increase each year).

You are correct, I have looked at pension and anything not taken passes to my beneficiary, currently my husband, should anything happen. That is reassuring.

Have you spoken to your husband about this? It reads like he has specifically given you the money to top up your pension how would he feel if you deviate from the plan?

50/50 is a good way to go. You get the tax benefits of paying into a pension and the tax benefits of withdrawal from an Isa on retirement to reduce tax liability. Assuming you are thinking of cash Isa, it might be worth doing it before/if Labour reduce how much we can pay in.

As you earn £45k I wouldn't put in more than you will be able to claim tax back on this year, so put in the max to your pension that you can benefit from tax relief on. With the rest put it in a stocks and shares ISA as a long term investment.

I thi K you will benefit from following The Rebel School advice. You can find them. On YT and FB. Before you put your money into your pension or an ISA listen to their course. You can also ask questions on the FB group (I am on the app and can't paste links).
Inc eyou educate yourself you will be able to make an informed choice.
I hear thst The People's pension don', T have good choice of funds to invest into. You may decide to open your own SIPP (personal pension) account with another provider after you have all facts.

How did you decide on People’s Pension - what is their range of funds, how well do these perform and - extremely important!! - what are their fees and charges in comparison with more established companies such as Vanguard or AJ Bell?

I haven’t in any detail, I am currently holding onto it in case we need it for expenses as hoping to move, but after we move I should still have it all and just looking to find out about other options.
I wouldn’t hide it from him and he wouldn’t have any stipulations. We just want it to be invested in the most sensible way.

It was through auto-enrollment at work, so I didn’t choose it as a provider myself.

Previously I had an NHS pension so I didn’t need to source a provider previously. I have just left the NHS pension ‘frozen’ in case I ever go back, I haven’t made any transfers out. But I can’t contribute to it if not employed by the NHS.

There is no right or wrong approach here but it does depend on when you might the money. Firstly, you should get tax relief on any amount you contribute to the pension as an AVC. The pension provider will claim basic rate relief such that if you paid in £35,200 the government adds £8,800 and you have increased your pension by £45k. Cons are 1) locked until retirement (probably 57 but check the scheme) and 2) taxed on the way out. You can get tax relief for for anything up to your earnings but you earn more than you able to put in by these numbers so it likely could all go in.

Taxation of pensions on death depends on when you die but in principle it is passed on and not lost.

ISAs provide for tax-free growth but you can only put in £20k a year so could put in £20k now and wait until April next year to put in the rest. Pro is that you can access it flexibly.

In terms of best returns that normally depends on what you invest in rather than the tax wrapper.

If not sure seek professional advice.

How to decide what isa to put the £20k in? I was going to do a SIPP but would only be a small additional pot so an isa may be a better option.

The People’s Pension is pretty established, and incredibly common for employer schemes - it’s one of the main providers. We chose this at a small company I sit on the board for, we took advice and it came up on every comparison we did as a front runner (although we were considering from an employer not employee perspective).

Thanks all, advice is much appreciated.
I ended up putting £20K into pension (became £24K with government contribution) and £10k S&S ISA.