Alison's always been good at saving and has amassed a decent wedge of cash alongside her pension. But cash is pitifully weak these days, and Alison thinks retirement could look a lot more appealing if she could use the next decade or so to really boost her savings pot. But how?
Confidence level: 4 out of 10
"I'm not one to shy away from trying things out but it's the skill part I think I lack, which is why I'm not rating myself higher. I'm not scared of the risks involved or anything like that - I know you can lose as well as win with investments and pensions - I just don't want it all to be guess work.
"I'm trying to pay a bit more attention now that I'm earning a decent wage and the years are going by. I have lots in my Cash ISA but it's probably a bit wasted in there, so I want to know more about stocks and shares, and want to make sure my pension is invested sensibly. At the end of the day, I don't want to look back in twenty years and regret that I did nothing."
My pension planning question...
"I would like to move my pension (£50k) to have a more global exposure with lower fees. I also have £100k in Cash ISAs and I would like to move some into S&S ISAs or more into my pension. How do I decide what to do and which manager/platform to use? And is it a good idea to have pension and S&S ISA in the same place?
Answer by Laith Khalaf, AJ Bell
Financial Analyst - Meet the experts
Lots of questions so let’s get stuck in! First the pension (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/private-pension/) or stocks and shares ISA (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/stocks-shares-isa/) question. This depends how long you’re willing to lock your cash away for. You can’t get at money in your pension until you’re 55, and that’s rising to 57 in 2028, so if you think you might need the cash before then, stocks and shares ISA might be a better option. You can transfer as much as you want from a Cash ISA (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/cash/) in to a stocks and shares ISA and it won’t affect your annual ISA limit of £20,000, as you’ve already got it in the ISA wrapper.
An ISA has great tax benefits – no income tax or capital gains tax (CGT) to pay, but the tax benefits of a pension could be slightly better. In particular if you’re a higher rate taxpayer, because you get 40% tax relief on your pension contributions. You would use up some of your annual pension allowance by moving in money from a Cash ISA however, so you should think about that when making your decision. You could consider moving a bit of cash into both, your pension for long term retirement savings, and your stocks and shares ISA for medium term savings, or indeed the flexibility to keep that for long term retirement savings too if it turns out you don’t need it.
As for which pension option suits you best first, check your employer pension scheme. Often these schemes offer to pay in a certain percentage of salary if you pay in the same amount. Some even offer higher employer contributions when paying in more yourself, so if you’re using money from your cash ISA to contribute then you’re doubling your money, and getting tax relief on top! If that’s not an option for you then you could consider a low cost SIPP (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/private-pension/), which gives you investment flexibility, and can be held on many platforms alongside an ISA, making it easy to manage. This would apply to your existing pension too, which in most cases can be transferred to a SIPP, but you might want to check out if there are any lower cost global options available within your existing scheme first.
In terms of which platform to choose, often key criteria to research are cost and service. Platforms charges vary quite considerably, as do the services provided. Decide what’s important to you, for instance do you want a mobile app to keep track of your money? Will you occasionally need to speak to a real person for help? Once you have found platforms that meet your needs, compare services and charges.
If you need help picking your investments, many platforms will offer guidance on which funds to choose, and will have a list of their favourite funds available to you, including global funds.
Most providers will have a document which explains the protections they have in place to keep customer money safe, so if you’re concerned I’d suggest taking a look at these, which are often available online. I hope that answers all your questions! Good luck with your decisions!
The information in this article is for information purposes only and is not a personal recommendation or advice. Remember that the value of investments can change, and you could lose money as well as make it. Tax treatment depends on your individual circumstances and rules may change. Before you transfer a pension, check with your current provider that you won't lose any money or valuable benefits.
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