Financial Matters

With Akwasi Duodu | akwasi@sterlingandlaw.com | www.sterlingandlaw.com

Should you Invest in a Pension or an ISA?

Because pensions and ISAs work differently and have their own set of rules, it can be difficult choosing between the two. What they do have in common is that they are both tax efficient ways of saving. Your choice would depend on your personal circumstances and what’s most important to you. There are several factors to consider including tax relief and accessibility. This simple comparison of the two products should help you get to grips with both options.

A Brief Summary of Pensions & ISAs

A pension is designed specifically to help you save for retirement. One of the key benefits of saving into a pension is that HMRC will contribute too, in the form of quite generous tax relief. An ISA on the other hand, is essentially a tax-free savings vehicle. There are several types of ISAs. For the sake of this discussion, we will concentrate on the most popular – Cash and Stocks and Shares ISAs.

Paying In

Pensions: When you contribute to a pension, you receive an income tax refund on that money. This means that for a basic rate taxpayer, the government effectively adds £25 to every £100 contribution you make. It doesn’t end there. Higher and additional rate taxpayers can claim further tax relief through their self-assessment tax returns. The maximum amount you can save into a pension annually is currently 100% of your salary, up to a maximum of £40,000. ISAs: You don’t receive tax-relief when you pay into an ISA, and your investment is made from money you have already been taxed on. This is an important distinction. Your investment is however protected from tax, so you pay no tax on the interest or growth you earn. The maximum amount you can pay into an ISA is £20,000 per tax year and you can make lump sum of monthly contributions up to that limit.

Investment & Returns

Pensions: Pensions funds are typically invested in a range of assets, which would include a mix of shares, bonds, property and cash. Designed to provide an income in retirement, pensions are best invested for the long term and would be subject to stock market fluctuations. ISAs: There are two types of ISA’s – Cash ISAs which are tax free deposit savings accounts and Stocks and Shares ISAs which are invested in a similar sway to pensions and therefore better as longer term savings.

Pensions v ISAs – Withdrawing Money

Pensions: You can only access your pension when you reach 55. This age will increase to 57 in 2028. At that age, you’ll have a few decisions to make including whether to take a take a tax-free lump sum of 25% of the value of your fund and how to take your income, for example via an annuity. ISAs are much simpler. You can take your money out of your ISA whenever you want, and this will not affect the tax-free status. Just remember ghat stocks and shares ISA will be subject to market fluctuations.

Conclusion

Pensions win when it comes to tax efficiency. This is true both for basic and higher rate taxpayers. ISAs on the other hand win when it comes to flexibility. If you don’t need the money before age 55, consider a pension. If you need flexibility and easy access to your money an ISA may be best. There are other things to consider, so speak to your financial adviser before making a decision. Either way, using these opportunities together could help you shelter significant amounts of your savings from tax.

Friday 7 – Sunday 16 May: Bell House Sculpture Park

11:30am-6pm. Join us this May as we take part in Dulwich Festival’s Artist Open House with the Bell House Sculpture Park! The Bell House gardens are open during the Dulwich Festival exhibiting works of 11 artists and 3 dancers. Forged metal, carved monoliths, playful perspex, resonant ceramics and woven alloys are but some of the forms that assemble to shape the pieces in the Sculpture Park. See how the artist’s have made new works in response to the architecture and history of the house or how existing works find new context in situ. This is our first public event since restrictions began and we are looking forward to welcoming you all! We will be operating in line with the latest government Covid safety measures. As such pre-booking is advised to help us manage social distancing. Walk-up’s are welcome but you may have to wait a little if we are busy! By booking you will be agreeing for us to hold your information for Track & Trace. We will keep this information in line with GDPR regulations. Alternatively, on arrival you can either scan the QR code at the entrance or we are more than happy to take your details with good old pen and paper! For full details of opening times and how to book please go to

www.bellhouse.co.uk.

Notice

Please note that all this information was correct at the time of going to press. However please do check details ahead, as the lockdown may be extended and this could affect some events.

Monday 10 May: Exclusive Live Cook-Along with Rukmini Iyer

6.30pm-7.30pm. Join us for a night-in like no other: a virtual cook-along with best-selling author of The Roasting Tin series, Rukmini Iyer. Follow live at home as Rukmini leads you through one of her wildly popular recipes – with step-by-step instructions and expert tips, it’s the next best thing to having her in your kitchen! The cook-along will be a masterclass in Rukmini’s trademark style of fuss-free, flavour-focussed food. Hazel loves cooking from Rukmini’s books and The Roasting Tin Around the World has been one of our bestselling books at the bookshop too! Tickets from £10. www.village-books.co.uk

Wednesday 12 May: Dulwich & District u3a Open meeting: Introducing Link Age Southwark

2pm-3.30pm. Link Age Southwark has been operating in the borough since 1993. The charity's vision is of friendly, vibrant local communities where older people thrive. In this talk the Charity's Director, Sophie Wellings, who previously worked for the Third Age Trust (the u3a national umbrella body), will outline the work of the charity as well as exploring opportunities for collaborating with the u3a.

https://u3asites.org.uk/dulwich/events.

Thursday 13 May: Filmmaking 101: The Camera with Dan Robb

7pm - 9pm. What does a director actually do? What makes a good script? Why is editing so important? Every month, an industry professional will host an online tutorial, where they will delve into the fundamentals of a specific filmmaking discipline. The cost of this tutorial is £15. We have 2 free/bursary tickets available for those unable to pay the full price.

www.bellhouse.co.uk.

Thursday 13 May: Operation Pedestal by Max Hastings

7.30pm-8.30pm. An epic, intimate new account of one of the greatest naval dramas of World War II, from number one bestselling historian Max Hastings. Tickets from £10. **We have been allocated a number of books which Max Hastings has kindly agreed to dedicate and sign.**

www.village-books.co.uk

Thursday 13 May: Ancient Egyptian Art - Three Thousand Years of Treasures

8pm-9pm. Lecture will look in depth at these treasures, examining techniques used, who commissioned them, their purpose and meaning. These are for members only. To join or book tickets: www.theartssocietydulwich.org.uk

Monday 17 May: Change your habits - change your life

7pm-8pm. Have you ever tried to build a new habit or routine only to find yourself slipping back in old patterns? The habits and routines we chose daily impact not only our current situation but our future path. You will never change your life until you change your habits. There’s a tiny difference between thinking ‘I could never do that’ and realising ‘I can totally see how that’s possible,’ As successful habits are formed your brain is rewired and it builds a wave of positivity and motivation. In this session, you will learn how to create habits that stick, embrace change, and move towards the life you wish to lead.

www.bellhouse.co.uk.

Monday 17 May: An Evening with Sophie Hannah and Adele Geras

7.30pm-8.30pm. Join mother and daughter Adele and Sophie as they talk about their new books, writing careers, changing direction and how to insert a murder into a story. Based on a reallife voyage, Dangerous Women by Hope Adams (Adele Geras) is a sweeping tale of confinement, hope and the terrible things we do to survive. The Killings of Kingfisher Hall by Sophie Hannah see Poirot return to solve another muder mystery. Tickets from £6. www.village-books.co.uk