Pension Or Savings

[david56]

Would it be more rewarding to put monies into a long term savings account or an ISA. I'm 44 year old lady on low income and can only pay about 100pound a month

[fiction-factory]

The title says pension or savings but the question says long term savings account or an ISA.
Are you considering 3 options?
The answer will be : it depends. I will be back shortly

[fiction-factory]

For savings I would generally go for the highest interest rate without your money being tied up too much. There are some regular savers 9non ISA) which pay good rates but some require you to have a linked account. Look on Money Saving Expert. Interest will almost certainly be tax free for you from a savings account so there is no need for an ISA at present, although they may be part of a larger portfolio.
ISAs can be cash ISAs or shares
Pensions contributions give tax relief but you could pay tax on it when you draw it so there may be no tax benefit. It all depends on your circumstances. Pensions mean your money is tied up until age 55 so don't do it if you may need some cash before then.
If you have any debts pay them off first

[ubasses]

You should take advice from an IFA.
If you pay £100 pm into a pension, it will either be taken from your salary before tax is calculated or you will have an extra 20% added to your pension contribution. Assuming you do not have a Company Defined Benefit Scheme, growth will depend on performance of the Stockmarket. As you have over 20 years to normal retirement age and if you are happy with the risk that could be the best way to go as you will have long to ride the peaks and troughs.

Paying into an ISA your capital is guaranteed but interest rates are very low at the moment soand growth will be quite slow but interest will be tax free. As long as all interest from all savings is below £1000 it would be tax free, it could be better to start with a higher rate Regular savings account and review annually, the option is then to transfer lump sums into and ISA if you see rates rising.
So as I said at the outset it is wise to take advice from a professional.

[fiction-factory]

How much would a meeting with an IFA cost please ubasses?

[fiction-factory]

I'd take a more cautious approach at this stage and try investing £100 a month in one of the higher rate savings account for a year and then review whether you can afford to continue saving at that level. Over this period you can look into pensions and share investment and after a year or so consider whether you wan to pay an IFA

[ubasses]

Most Banks have an IFA and they do not charge for first appointment, even if they only have a 'tied' Adviser available, David is looking for advice on different products so she would still receive this on an unbiased basis on which would be best for her, with no obligation to take them from that Company. She could then go away and find the best on the market. No need to pay.

[ubasses]

Are you employed or self employed? if employed all Companies should now have a Pension scheme and if you salary is over £112 per week you should be auto enrolled into it. This would benefit you as the Company will make a contribution as well as the tax relief.
Just spotted Fiction-factory's comment on being taxed in retirement, if your only retirement income would be state pension and income from the intended savings your income is most likely going to be below the tax threshold and all the income will be tax free, or at most, only on a very small amount over it, meaning you will 'keep' all the tax relief received during the investment term.

[fiction-factory]

I think auto enrolment pensions are pretty much a waste of time though ubasses at the moment. After many years of having an excellent career average salary scheme where i paid around 7% and the employer paid around 15% I am ow in an autoenrolemnt scheme where I pay 1% and the employer pays 1% into a DC scheme. The value at the end of a year is laughable and will pay a miniscule annuity benefit in retirement. Until autoenrolment is at around 15% total then I don't see it as a long term solution, particularly for a low earner.

[fiction-factory]

Sorry- struggling to type and having to submit sometimes just to unock screen.
No harm in paying into a workplace scheme- probably a good idea because of employer's matching contribution and tax relief- but if on a low income it will not provide anywhere near enough in 20-23 years for comfortable retirement (an income with state pension some way above the personal tax allowance), and at present contribution rates is unlikely to swallow up £100 a month for a low earner, so some other vehicle is also needed

[ubasses]

This is why I advise some professional advice. OP is posting on a male profile, so assuming it is Dave56's wife. If so the whole picture has to be taken into account. What other capital and assets do they jointly own, what retirement income will he have, does she just need a small top up.
On the other hand it may be a friend's profile and OP may be a single lady.
After 37 years in Finance, and sitting in with my customers and both the tied and independent advisers I know that every little bit of information is taken into account to enable them to give good advice. We have none of this.

[fiction-factory]

I agree, The answer to these is always 'it depends'. I've always worked things out without an IFA by setting out my longer term strategy aims, working out what I needed to/could afford to put aside and then researching products using personal finance articles, following MSE, Martin Lewis and Which etc. For those without our experience I can see the benefits of using some free advice if it is truly independent, although if someone had not got the experience of committing to putting a certain amount aside I would still suggest trying it for a bit first and then going to an IFA once the person is certain about what they can afford .