Personal Finance

‘Many downsides’ to pensions – Britons urged to consider other ways to fund retirement


On The Hedge podcast, personal finance expert Jason Mountford explained the “different options” that people have when it comes to long term investments. He said: “Pensions is one of them, but they are very restrictive.

“They are good for many reasons – the money you put in there is tax free and you get tax relief on the way in.

“They are good from an inheritance tax perspective in that they don’t attract any inheritance tax.

“So, there are lots of good things about a pension, but there are many downsides as they are very inflexible.

“You can put money in there aged 22 and you’re not seeing that money for 40 plus years.”

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Mr Mountford explained that life is unpredictable, and things can change at any moment. It’s not always practical to have thousands of pounds locked away until one retires.

He discussed the benefits of Individual Savings Account instead.

He continued: “There are plenty of other different options.

“The really big one at the moment is Lifetime ISAs.”

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Britons can use a Lifetime ISA to buy their first home or save for later life.

The government will add a 25 percent bonus to one’s savings, up to a maximum of £1,000 per year.

People can put in up to £4,000 each year, until they are 50.

Mr Mountford continued: “People use them to save for a first home, but they can be used for retirement planning.

“If you take the money out before aged 60 there is a penalty. You’ll lose the bonus and a little bit more, so you have the ability to make long term investments with the expectation that it’s for retirement.

“But if something happens and your circumstances change, or your plans change you can still get your hands on that money which can be the most valuable thing.”

Another ISA people can consider is the stocks and shares option.

Money deposited here is also tax free, so it has its own benefits.

He added: “There is no capital gains tax or income tax so you can grow as much money as you want, and you’ll not pay any tax on it.

“Depending on your level of income and your wealth, there are lots of different tax allowances you have access to as well.

“You have a dividend allowance of £2,000 a year you won’t pay tax on.

“There are lots of different tax effective ways to invest that can be for the long term, doesn’t have to be just pensions.”





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