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Combining your pension with other investment streams
Combining your pension with other investment streams
Pensions are very complex whereas ISAs are very easy to understand, but just because something is easy to understand doesn’t mean that it’s the best option.
Maidenhead,
Berkshire,
United Kingdom
(prbd.net)
26/02/2013
Pensions are very complex whereas ISAs are very easy to understand, but just because something is easy to understand doesn't mean that it's the best option.
When you save money into a pension fund you only pay tax on the money in the fund when you draw it as income, so it benefits from compound interest. ISAs are also tax efficient but in a very different way and are popular because the tax-exempt investment returns mean that they generally beat ordinary saving accounts.
You can invest cash into an ISA although there are limits (£5,640 this year), but can also be invested in longer-term investments for example equities. This is where they draw comparisons with pensions.
When comparing ISAs with pensions, it is easy to neglect the fact that a £100 pension investment does not leave your pocket £100 lighter, as an Isa investment would.
High-rate taxpayers can have substantial additional Isa investments whilst also investing into a pension and if it is kept for the long term, it can substantially add to the value and flexibility of their savings for retirement.
Gill Alton runs Alton Property Partners, offering a residential investment property service to help you build a portfolio for a secure financial future. Alton Property Partners provides a comprehensive and personal Property Portfolio Building Service for buy to let investment in the UK. Gill believes that property as a pension could be the answer. She says:
"Pensions and ISAs are both very well-known ways of benefitting from tax advantages and it's important to consider those two elements. However it is true to remember that pensions and ISA's both have limits to how much you can save. With an ISA, the limit is £5,640 per annum and with the change of Pension Rules recently there is now a limit on Annual Tax Relief on pensions of up to £40,000 per annum, so the goal posts have changed slightly.
"The reason pensions and ISA's are so popular are that they allow you to leverage the benefit of tax efficiency, however property investment allows you leverage your money in an alternative way, and this is often forgotten.
"With property investment you are able to use other people's money via a mortgage, you receive the full cash flow from the property even though you might have had to only contribute an initial deposit of 25%. Yes, the money you put into property is disposable taxed income however there are many ways you could offset your property costs against tax and a good accountant will gladly advise you of your legal entitlements. Also and rather importantly, if you remortgage your property and take money out to so make it work better for you, say to buy an investment property for example, this money is the best type of money - as it is completely tax free.
"So to me it would be encouraging to see experts say that investors might be better served by a combination of Pensions, ISA's and Property to ensure they have the best of all three worlds."
Notes to Editors
Gill Alton is the founder of Alton Property Partners, which provides a comprehensive and personal Property Portfolio Building Service for buy to let investment in the UK. To find out how property could be the answer to your pension worries, and to find out more about property as a pension click here. Alton Property Partners manage the entire investment process, from sourcing property at a discounted value, co-ordinating the Mortgage, arranging the refurbishment, right through to ensuring it is ready for the rental market
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About
Gill Alton is the founder of Alton Property Partners, which provides a comprehensive and personal Property Portfolio Building Service for buy to let investment in the UK.
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