From: "Andy Pandy" 
Newsgroups: uk.finance
Subject: Re: From Drawdown to ISA
Date: Wed, 24 Jan 2007 20:27:47 -0000


"John Boyle"  wrote in message
news:bc3qyRAZn7tFFwVV@johnboyle1.demon.co.uk...
> >Otherwise, other than changes in tax rates, I can't see how you'd pay more tax
> >through contributing to a pension.
>
> My typo apart, I am not saying you would pay more tax, merely pointing
> out that the tax paid on the resulting income quickly exceeds the tax
> saved on the contribution. I only mention this so as to broaden peoples
> minds away form the salesmens' expression 'A pension is tax free!',
> because it isnt. As life expectancy increases the amount of tax paid on
> the income is getting larger and larger.

Only because the pre-tax investment has grown (ie the tax you *would have* paid much
earlier has grown).

> If some funds were in an ISA
> then of course, subject to you managing the fund so as to last as long
> as you need it to, there is no tax payable AND capital (albeit
> potentially reducing) is protected.

But how do you predict when you're going to die? An annuity is basically insurance
against living too long, if you don't buy one then you can't guarantee not running
out of cash.

> >> >Pensions allow you to more than double the money you put in almost
> >> >instantaenously (subject to a few conditions).
> >>
> >> But heavily taxed and controlled on the way out.. which ISAs arent.
> >
> >Heavily? Usually far less heavily than it would have been taxed on the
> >way into the
> >ISA.
>
> You are fallling into the salesman's trap. Dont forget the tax is on the
> way out,

Of course. But with 25% available tax free and the remainder often taxed at a lower
rate, the tax advantages can be very significant.

--
Andy