This week we are hoping to answer several questions we have had from listeners in the past 6 weeks or so. It has been put to me that it would be valuable to share our thoughts and to explore whether it would be more beneficial to invest in a low-cost investment plan, achieve a decent level of return and pay whatever tax is due on withdrawal, or to invest into a pension, achieve the same level of return, pay what tax is due on withdrawal.......on the face of it, to me at least, it seems there will be no competition, but you know what they say about assumptions (My favourite quote about assumptions is...... 'Don't Make Assumptions'!)
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Invest or Pension......?
To be frank when I sat to do this analysis I wasn't sure where to start, I may have resembled the confused looking dog on the cover for a while initially! It is not a question that I have ever really been asked before in detail, so it took quite a lot of thought! The essence of the questions that I have received from listeners is, factoring-in the potential returns, fees and taxation of the 2 options, which one will yield greatest net return, an investment in a low-cost fund (if such a thing actually really exists!) or a pension in a regular managed fund!? We are making one BIG assumption here, and that is that in the investment you are paying low fees and in the pension you are paying high fees. I say this is an assumption because this is not always the case of course.....but it was the question posed so let's take it head-on!
Paddy Delaney