Pensions - does this exist?

[AcornAutumn]

Hi
Apologies if this is stupid

Is there any such thing as a pension that’s like a cash investment - so not at risk of reducing in value?

Thanks.

You can have cash based funds in a pension, however, why would you want this? As you would

How long until you retire?

From “ You can have cash based funds in a pension”

You mean just like cash in a bank? But static with no interest rate?

I’m only looking at this because of tax relief. OTOH it seems like free money from the government

On the other, there’s so many restrictions about using it.

You can have a defined benefit workplace pension, eg in the state sector if you’re a doctor or a teacher. That is not related to the stock market at all but based on your length of service and salary.

If you have a SIPP, I don’t think you can have it completely risk free like a savings account. However, there are lower and higher risk options. Investing is much better than cash savings so it makes more sense unless you plan to pay out the entire pot very soon and don’t want to risk the fluctuations in the market.

It would be a SIPP, yes

Does anyone have thoughts on S&S ISAs vs SIPPs?

As you pointed out, SIPPs are tax efficient so even if you’re a basic rate tax payer, your 1k immediately turns into 1.25k with the tax relief (1.67k if you’re a higher rate taxpayer). Makes more sense if you’re saving for retirement. ISAs are good for rainy day savings or other things that you might need to pay for sooner.

If you’re under 40, you can also look at lifetime ISAs as they attract a 25% government top up.

I’m 44

In reality, I have always though of pensions as being less useful than a second property. I always prioritise non pension savings.

Of course no one can predict the future but the rules etc around pensions concern me.

Of course there are asset classes you can have in a pensions that are considered safe such as government bonds.
You would still have charges for administering the scheme and dealing and as they will also tell you, inflation might reduce the value of your pension.

Government bonds scare me right now.

Thanks everyone.

I’ve got BTLs but that’s obviously requires work and taking on risk (void periods, dodgy tenants, unexpected repairs) and debt if you need a mortgage. It doesn’t work for everyone in terms of income tax either. If you want to sell to fund your retirement, then you’re likely to have a lot of CGT to pay. And if you plan to live off the rental income in retirement, then as you get older and frail you might really not like the hassle.
Probably worth doing your numbers on this one. It’s definitely a lot more straightforward to pay money into a SIPP.

Search for Money Market funds if you desire a 'cash' based fund.

However 11 years until you can take your pension, I would be looking at least 40% equities.

Of course no one can predict the future but the rules etc around pensions concern me.

Which rules concern you?

@BobbingPuffins

Of course no one can predict the future but the rules etc around pensions concern me.

Which rules concern you?

Like suppose they change the ages again, suppose they change the lump sum you can take

It feels like there’s a lot less control for the owner of a pension.

I save into a workplace pension but also save into a S&S ISA. Technically I'd probably be better increasing my pension contributions as it's pre-tax income but I view the S&S ISA as a fund that will allow me to retire earlier if they put any further age increases on accessing pension savings. So essentially do both.

Yes, Pepper, but then I get a bit....is the pension really a good idea..?

I hear they’re looking at more changes to pensions again but that’s maybe lockdown speculation.

I’ve told myself I’ll make a decision by the end of this week.

I don't see the problem with pensions. It's the most tax efficient way of saving.

Over time equities always outperform cash and bonds. The market is still low so it's actually a great time to invest.

I don't understand your point about pension age. That's only relevant to the state pension. With a personal pension you can choose to take it earlier than state.

They are changing the minimum age you can access a pension to 57, it's currently 55 so I do see what OP is saying but I agree they're tax efficient and I still think a good idea.

Current thinking is that the most likely next change is a further reduction in the amount of contributions that you can make that will qualify for tax relief, rather than changes to the tax free lump sum proportion.

As a pensions adviser I have to say that where people are reasonably close to the age at which they are going to start making withdrawals rather than contributions, it can make sense to add to ISAs rather than pension, simply because there isn't a massive difference in the net amount received on withdrawal if you need flexibility/tax efficiency. However, there is a big difference in Inheritance Tax treatment which might be a more salient issue for some.

@Pepperwand

They are changing the minimum age you can access a pension to 57, it's currently 55 so I do see what OP is saying but I agree they're tax efficient and I still think a good idea.

I thought they were changing it to 58?

Sunseed “ it can make sense to add to ISAs rather than pension, simply because there isn't a massive difference in the net amount received on withdrawal if you need flexibility/tax efficiency”

That’s interesting.

I don’t have children so I don’t think about what happens to it after. Similarly, I tend to think of i got into a jam after pension age, I could do equity release and the bank can have my home when I cark it.

I do have a goddaughter but she’s already inherited from grandparents and stands to inherit more money from parents than I’ll ever see in my whole life. She can take me for expensive cocktails when she’s old enough!