Pension or ISA for Retirement? Here’s How to Decide

Investors are faced with many questions and decisions during their investment lifetime, and one particular decision is highly relevant when thinking about investing for retirement.

Pension or ISA for Retirement

Pension or ISA or, more specifically, pension investment or the new Lifetime ISA. Savvy investors know that a mixture of the two options could be a great idea, depending on your circumstances. Here we explain more.

What is a Lifetime Isa?

According to Financial Advisers, anyone under the age of 40 can now open a Lifetime ISA, or Lisa. You can save £4,000 a year in this ISA as part of your overall ISA allowance, and the added incentive for retirement investors is that you get an additional 25 percent of your money as a contribution from the government – up to a value of £1,000 a year.

Of course, you can only then use this money to purchase a house or use after the age of 60 for your retirement. One of the benefits of this scheme is that you can use the money, after the age of 60, for anything – it is not tied in as it would be in a pension.

More About Pension Funds

One of the benefits of a pension fund is that it can be passed down to a spouse or successor on death, and therefore it becomes available to them without tax. It is vitally important to consider wisely how you are going to invest in pension funds for your retirement. Any wrong move could see a cut in income that you are relying on to get through your retirement years.

A wise investment strategy seeks to limit the amount of swings in the portfolio in order to prevent costly falls. This could be achieved through the use of multi-managed funds that are spread across a variety of assets including property, stocks, and bonds. There are a variety of lower-risk funds that suit the purpose of investing for retirement well. Structured funds are particularly suitable for boosting returns.

Making the Most of Your ISA

You can also now invest in AIM stocks as part of your ISA. This is a new move by the government to allow people to invest in smaller, more volatile companies that have the potential to bring in a good return on investment – but it must be remembered that this will not be without risk. Another advantage is that there are certain tax benefits when the money is held in

Another advantage is that there are certain tax benefits when the money is held in qualifying fund for over two years. A good fund manager will advise you on how to get the right balance of stocks in your ISA – the right balance will always be dependent on your own individual circumstances and needs.

When deciding on pensions vs ISAs it can be a good idea to make use of a mix of the two different types of investment vehicles in order to take advantage of the tax saving implications of both schemes.

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