When you are planning your retirement you will need to decide which type of saving vehicle will best match your needs.
Whilst your ‘sunset’ years can be a great period retiring can also expensive, and when your regular paycheck stops coming you need to depend on your nest egg to match your lifestyle and expenses.
To make sure that you can not only live well after you stop working full time, but also pay for other expenses; healthcare for example, you would want to invest wisely in a retirement account.
Is an ISA Right for You?
If you choose to invest in cash ISA (individual savings account), not only will your savings work for your retirement years but you will also save on tax.
Because this type of account offers interest without taxes, it could be an ideal tax planning method. This type of investment is more stable so is better suited to those who are risk averse. The downside is that there is the chance that the interest rates will not grow a whole lot, unless you are open to taking more risks.
For people looking for a relatively safe place to invest for their golden years, this might be an option worth considering. Stocks and Shares ISA, while entailing a little more risk, also offer more returns, and the flexibility to invest as you like. It would also lead to greater degree of tax savings. There is also no time limit as to when your account is open for you to withdraw funds. Should you ever find yourself in a financial pinch you can think of using this account to rescue. However, with good financial planning, your savings should remain safe, and there should be no need to prematurely access it.
Pensions Are Still Worth Considering
Pensions have been the preferred way to save for the nest egg for decades. Pensions offer tax rebates, in that the amount you invest attracts relief on taxes, so you get to save more. The more you invest in a pension the more you stand to get as tax relief. Also, for employers that are contributing to an employee’s account, there is tax relief, and for the employee, more funds into the account. However, the planned changes to the tax rates on pension funds, would mean less savings.
Another reason to trust pension accounts is that contributions can be backdated. The contribution limits remain high, although the proposed changes to the law need to be studied in detail. You would also not be able to access the funds until a minimum age, so you would be prepared to do without the cash you saved in your hands, for at least a few years. In such a situation, you might want to consider an ISA. While the money you pay into the pension account may not attract tax, the money you withdraw will carry tax. How much you pay as tax is something your financial adviser will be able to tell you.
The Importance of Financial Advice
The New Pension Freedoms brought in by the current government have shaken up the way people plan for and enjoy their retirement. When it comes to making these important financial decisions, it is important that you seek the advice of a capable financial adviser.
The decisions you take today in regard to your savings and funds for post retirement will have far reaching consequences, for decades to come. That is why with the assistance of a financial adviser, who offers advice customised to your situation, you will be in a situation where you can face the future with confidence.
In addition to understanding the pros and cons of ISA and pension funds, you will also receive advice regarding other types of funds such as savings account, and premium bonds. You might also want to learn more about SIPP or Self Invested Personal Pension.
If you would like to speak to someone about your pension please do not hesitate to contact Maxim Wealth Management on 0141 764 0040 (Glasgow) 0203 841 9941 (London). Alternatively fill out our Contact Form with your question and we’ll get back to you.