What is BEST – Pension or ISA ?? The Debate Continues..
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Cash in your pension OR Get a Better CASH ISA ??
Deciding your future is hard enough without having to add some more things to debate to the discussion. The Pension VS ISA debate is in full force with very distinct and different advice coming from all directions. There are big fans of a traditional pension and there are big fans of ISA. Trying to figure out what is right for you and where you stand can be difficult.
Taking a look at the pros and cons of both plans can help you to figure out where you stand and how you want to prepare for the day when you retire.
There are some absolute benefits to the traditional pension plan:
- High limits
- Income tax refund when you dedicate more to the pension plan
- Employer matching
Most pension plans allow high contribution limits which is nice if you want to have less taxes to pay. If you put in more money than you will get a refund on your taxes but the best part of a pension plan is that most employers match your contributions so if you are putting in 3% of your salary they will also put in 3% this is like free money and a huge benefit.
Of course there are some cons:
- No access until you are 55
- Hard to understand
- The government always has their hand in the pot
You cannot access the money in a time of real financial crisis, this can be a huge problem if you are in dire straits and have an account full of money that you cannot access. Pension plans are seemingly on purpose complex so that they average worker cannot understand them. Government meddling is a huge issue with traditional pension plans which can make people feel a little uneasy and question whether their savings is secure or in constant jeopardy.
ISAS has its own set of pros and cons. The pros are simple enough:
- More control
- Easy access when you need it
- No government meddling
- Simple options
You can control where your money goes. You can choose whether you want it in a traditional savings environment or you want it in a wrapper plan used to buy stocks and shares. You can access the money any time you need it. The government has nothing to do with it and the options are easy to understand.
- No employer matching
- No tax break
- Low limits on contributions
Best Cash ISAs
There are several companies that offer different ‘Best ISA Cash’ accounts, but you need to shop around. Comparison sites tend to me the best option to search for the best cash ISAs.
In terms of setting up a cash ISA or a Pension, it really depends on what you want to achieve, when you plan to retire etc.
Overall: Pension v ISA
It is really a personal preference but if you have an employer that is paying matching savings into a pension plan, it would be very hard to deny that is the one benefit that will sway most people on the Pensions VS ISA debate. Free money is hard to beat.