Of course, but on its current value!! Not on the value it will be in x years.
No he wont. Divis still suffer the tax credit. The internal taxation of Pensions & ISAs are almost exactly the same.
See above.
Id rather pay 22% on £100 than 22% on £200
But not exactly the same, my route is slightly better.
I know, but the ISA quasi income wouldn't be.
Only in bits. You cant get at it (other than any TFC of course) and, subject to the terms of the annuity you choose, the capital is lost forever whereas any remaining capital in the ISA is available at any time and in the event of death can be passed to the beneficiaries of your estate.
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T
Tim
"john boyle" wrote
Why? The end result is the same...
Let's say gross returns are such that 100 grows to
200 in either pension or ISA, and tax rate is 22%:-
First twin: Initially he has 100 in pension plan, he takes this out (paying 22% on 100 = 22 tax) and puts the 78 into ISA which grows to 156 (ie doubling over the period chosen).
Second twin: Leaves the 100 in pension plan, which grows to 200 in pension plan, he pays tax of 44 (22% on 200) leaving 156 at the end.
That's exactly the same result for either (both end up with 156 from the same initial
100), even though the first twin pays 22 tax and the second twin pays 44 tax!!
"john boyle" wrote
My point entirely!
"john boyle" wrote
Better in what respect?
J
john boyle
In message , Tim writes
This is incorrect. The tax on the £200 is not £44. It is 22% of the annuity derived from 75% of the £200. Being a Pension Annuity (and not a PLA) all of the income is taxable, and could possibly nudge the pensioner into a higher tax band, could also result in a a decrease in the Age Allowance, and may also effect the pensioners qualifying 'income' for state benefits.
I have not posted a worked example because at this moment I do not have access to annuity rates, but hope to do so later.
In addition to my post above, it provides Capital Preservation, Flexibility and also, if the ISA remains invested in asset backed investments after retirement day, will possibly give some protection against inflation whereas as an annuity is fixed. (Index linked annuities give such a poor initial return that most people do not select them).
A
Alan Frame
Hehehe!
I don't care if the govt raise the state/private pension age to 75, as long as I can 'retire' at 50, then start work again again at 65.... :-/
As GBS said: "Youth is wasted on the young"...
rgds, Alan
T
Tim
"john boyle" wrote
You misunderstood.
I'm talking about the initial 100 being just that small *part* of the "pot" which produces *part* of the first year's pension.
The "pot" could initially be 10,000, giving 2,500 LS and 7,500 to buy annuity, which might give the first twin a few hundred pounds pension each year.
The 100 I am referring to is simply a part of the 7,500, which goes towards buying the *first* year's annuity.
"john boyle" wrote
Yes, but ALL of the above also applies to the money coming out of the pension a year earlier for the other twin, before he puts the first year's pension into the ISA.
In other words, those issues apply to *both* twins...
"john boyle" wrote
How do you mean? The money coming out of the second twin's pension (starting a year later) can be preserved just as easily as the money coming out of the first twin's pension...
"john boyle" wrote
Granted, it will be more flexible, but we were talking about the respective values, not their flexibility.
"john boyle" wrote
For those real assets to give any protection against inflation, the income taken from them would need to be more like the amount of an index-linked annuity than a fixed annuity. If the initial return on IL annuity was considered "poor", then they'd need to be taking more than the *real* performance from their "asset backed investments"...
J
john boyle
In message , Tim writes
I havent misunderstood, I am merely describing the exact situation to which I originally described, i.e. comparing taking a pension now and investing in an ISA and subsequently making withdrawals form that ISA against taking the pension later.
They apply to both Twins income from their Pension, but not to the investment into which the first twin places his investment, i.e the ISA.
No it cant. After both start taking their income the first twin can say "hey Brother, I've won the lottery, heres the dosh in my ISA", the second twin cant do that.
It depends n the underlying performance of the investment too, which is why I used the words 'possibly and 'some'.
T
Tim
"john boyle" wrote
Then you should realise that for every initial 100 that goes towards providing that first year's pension, it will either provide 78 growing to
156 for the first twin, or for the second twin it will grow to 200 then be taxed at 22% -- still giving 156 at the end for both.
"john boyle" wrote
Ah, but no - it doesn't apply to either twin's investment because the first's is within the ISA and the second's is within the pension plan -- and so they are both taxed roughly the same (for that year).
"john boyle" wrote
But instead the second twin can say: "hey Brother, I've won the lottery, I'm getting a much higher pension per year than you are!", the first twin cant do that.
"john boyle" wrote
Agreed, but that is not a reason to favour one over the other because they can *both* be invested in the way you mentioned.
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