Stocks n Shares ISA



So if someone has 30k to invest for the next 7 years or so.

Where would people put their money?

S&S ISA limit is £20k a tax year so I'd put in 20 now and the other 10 after 5th April

I'd go for a low cost global tracker. The FTSE100 is too dependant on a handful of banks and oil companies (sectors which aren't doing well right now) and you want some exposure to the US and the rest of the world. As previously mentioned the Vanguard Lifestyle funds cover all of the bases. The 80% fund grew over 7% last year despite the "Covid crash" in the spring.

 
S&S ISA limit is £20k a tax year so I'd put in 20 now and the other 10 after 5th April

I'd go for a low cost global tracker. The FTSE100 is too dependant on a handful of banks and oil companies (sectors which aren't doing well right now) and you want some exposure to the US and the rest of the world. As previously mentioned the Vanguard Lifestyle funds cover all of the bases. The 80% fund grew over 7% last year despite the "Covid crash" in the spring.


Thank you. I take it all this is done online?
 
Put 8k into a pension government tops up to 10k and it grows 100%. Withdraw 20k tax at 20% of 15k is 3k you get 17k.

Put 8K into an isa it grows 100% to 16k then you withdraw it you get 16k

Difference is £1k which is 5% of £20k
Good analysis
S&S ISA limit is £20k a tax year so I'd put in 20 now and the other 10 after 5th April

I'd go for a low cost global tracker. The FTSE100 is too dependant on a handful of banks and oil companies (sectors which aren't doing well right now) and you want some exposure to the US and the rest of the world. As previously mentioned the Vanguard Lifestyle funds cover all of the bases. The 80% fund grew over 7% last year despite the "Covid crash" in the spring.

I maybe wrong but think it’s only 20k if no money in a cash isa ? Maybe wrong though
 
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Put 8k into a pension government tops up to 10k and it grows 100%. Withdraw 20k tax at 20% of 15k is 3k you get 17k.

Put 8K into an isa it grows 100% to 16k then you withdraw it you get 16k

Difference is £1k which is 5% of £20k
That’s totally a flawed calculation. As I said you are not understanding the impact of compounding. People could be contributing to a pension for 40 years plus.

Option A.
If you put £8k in year a pension the government would top it up by 20% to £9600. That then grows at let’s say 5% year for round figures. Year two you have £10,080. Then that grows at 5% for the next 49 years assuming no further contributions are made. It’s the knock on impact of interest on interest and interest on tax relief.

Option B
You put the same £8k into a ISA for 49 years and it grows at 5% a year.
No other contributions are made only £8k has ever gone in.

Option A you would end up with £70k approx
Option B you would end up with £58k qpprox

That’s one year - if you contribute consistently every year for 40 years you are talking massive differences.

when you draw down a pension you can then buy an annuity which is taxed yes but you still get personal allowances etc which is currently the first £12500 tax free per year. Which is on top of the potential 25% tax free lump sum.
Good analysis
It’s wrong!
 
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That’s totally a flawed calculation. As I said you are not understanding the impact of compounding. People could be contributing to a pension for 40 years plus.

Option A.
If you put £8k in year a pension the government would top it up by 20% to £9600. That then grows at let’s say 5% year for round figures. Year two you have £10,080. Then that grows at 5% for the next 49 years assuming no further contributions are made. It’s the knock on impact of interest on interest and interest on tax relief.

Option B
You put the same £8k into a ISA for 49 years and it grows at 5% a year.
No other contributions are made only £8k has ever gone in.

Option A you would end up with £70k approx
Option B you would end up with £58k qpprox

That’s one year - if you contribute consistently every year for 40 years you are talking massive differences.

when you draw down a pension you can then buy an annuity which is taxed yes but you still get personal allowances etc which is currently the first £12500 tax free per year. Which is on top of the potential 25% tax free lump sum.

It’s wrong!
It’s not. I have said it’s based on being a basic rate taxpayer on the way in and on the way out.
 
That’s totally a flawed calculation. As I said you are not understanding the impact of compounding. People could be contributing to a pension for 40 years plus.

Option A.
If you put £8k in year one the government would top it up by 20% to £9600. That then grows at let’s say 5% year for round figures. Year two you have £10,080. Then that grows at 5% for the next 49 years assuming no further contributions are made. It’s the knock on impact of interest on interest and interest on tax relief.

Option B
You put the same £8k into a ISA for 49 years and it grows at 5% a year.
No other contributions are made only £8k has ever gone in.

Option A you would end up with £70k approx
Option B you would end up with £58k qpprox

That’s one year - if you contribute consistently every year for 40 years you are talking massive differences.

when you draw down a pension you can then buy an annuity which is taxed yes but you still get personal allowances etc which is currently the first £12500 tax free per year. Which is on top of the potential 25% tax free lump sum.

It’s wrong!

For starters your first calc is wrong as it's not a 20% top up, it's 20% tax deductible which means its 25% added on so the 8I becomes 10k.

We're talking about having an ISA over and above a having a pension so the 12.5k personal allowance is irrelevant as it's already being used up by your existing pension.

In your example the 70k would be taxable (other than the 25% lumper)
The 58k is completely tax free.

If you dont take the 25% tax free lumper, then the net effect is exactly the same
 
Nope, you're wrong

You have to think of it like this
You deposit 10k, then government gives you 20% back. So 8k leaves bank account, 10k in pension
Class even more !
For starters your first calc is wrong as it's not a 20% top up, it's 20% tax deductible which means its 25% added on so the 8I becomes 10k.

We're talking about having an ISA over and above a having a pension so the 12.5k personal allowance is irrelevant as it's already being used up by your existing pension.

In your example the 70k would be taxable (other than the 25% lumper)
The 58k is completely tax free.

If you dont take the 25% tax free lumper, then the net effect is exactly the same
Im talking about a flat pension v an ISA not a mixture
Returns on dividends payments and such are going to compound also. If you've already got a pension, an ISA is going to give better access to the money.
Yes if you are already in a pension agreed
 
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aye that’s even better then as there lore going into the pension then I though!
What you need to get your head around is all of the growth that you earn will be taxed when you withdraw it no matter how much growth you make your final pot will be 5% bigger with a pension than an isa. Again assuming a 20% tax rate on the way in and out.
 
Class even more !

Im talking about a flat pension v an ISA not a mixture

Yes if you are already in a pension agreed

You did respond to me regarding tax in a post where I mentioned it was only true if you were doing isa instead of pension.
 
Fair dos
What you need to get your head around is all of the growth that you earn will be taxed when you withdraw it no matter how much growth you make your final pot will be 5% bigger with a pension than an isa. Again assuming a 20% tax rate on the way in and out.
That may be true but you can’t assume a 20% tax on the way out as it doesn’t take into account any personal allowances which this year is £12500 tax free.
So if we assume an annuity rate of 3% would mean you’d need to have a fund above £416k left after the 25% to be paying tax on the income.
Sounds canny
 
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