Which Saving Option is Best for Retirement Planning?


Planning for retirement is challenging. There are many different ways to save, and deciding which one is right for you can be difficult. You need to assess your potential needs in the future and your current circumstances just now to ensure that you are saving in the most efficient way.

Whilst your retirement can be a relaxing and enjoyable time, it can also be an expensive period. You no longer have paychecks coming into your account on a weekly or monthly bases and instead must depend on a nest egg to maintain your lifestyle and cover any expenses.

Investing wisely into a savings vehicle from a young age will help to ensure that you can live well after you stop working and you have enough income to cover any expenses.

Many people who are looking for a way to save will choose between an ISA and a Pension, but which one is right for you? Here’s an explanation of both to help you understand.

Individual Savings Account ISA

An ISA is a way to save money in a tax-efficient way. This type of account offers interest without taxes which makes it an ideal tax planning method. If you are risk averse, then this way of investing may be preferable as the investment is more stable.

For those looking for a relatively safer way to save for retirement, a cash ISA may be a possible option. Stocks and Shares ISAs entail more risk but can offer greater returns with the flexibility to invest however you like. Another benefit of an ISA is that there is no time limit for when you can withdraw funds meaning if you are ever in a financial pinch you can use this type of account to help.

Pensions Are Still Worth Consideration

Saving into a pension has been the preferred way to put money aside for retirement for many years. This type of saving vehicle has a number of benefits such as offering tax rebates, in that the amount you invest attracts relief on taxes, so you get to save more. This means that the more you save the more you can receive as tax relief. If your employer matches your pension savings through a company scheme you will receive tax relief on these payments as well.

Why Choose a Self-Invested Personal Pension (SIPP)?

Another way to save for your retirement is through a SIPP. A SIPP can be one of the most tax efficient ways to save your retirement. In this type of personal pension, the individual is able to manage their own fun, enabling you to choose from a wide range of investments, such as commercial property, individual listed securities in the UK and overseas, fund supermarkets, collective investment funds, and unquoted shares. This, of course, entails more risk so is suitable for a more adventurous saver.

With a SIPP you can borrow up to 50% of net scheme assets and can make ‘in specie’ contributions.

Why Financial Advice is Important

Recent changes to pensions brought in by the UK government have shaken up the way that people plan and enjoy their retirement. When it comes to making important financial decisions you should seek retirement advice of a capable financial adviser who will be able to assess your needs and circumstances and provide tailored advice on your options.

If you are still young the route you chose will have consequences in the future, so it is important you understand the variety of options available.

Besides ISAs and pensions, a financial adviser can also provide advice on other types of funds such as bonds, SIPPs and savings accounts.

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