ISA to the Rescue

Planning for retirement is one of the few things in life that is completely fair. This means, the more you put into it, the more you will be able to get out of it after you retire.

It is a very significant process in the sense that how you plan for it will essentially determine how you live in the old age. Annuities have long held centre stage; however, their rates have been dropping steadily for over a decade making it difficult for retirees to earn a decent income after retirement.

This has brought ISA’s in a new spotlight as latest statistics indicate that they are the better option in the long run. To be more specific, putting in £10,000 into an equity ISA for 30 years will result in an annual income of £2161 which is significantly higher than what a pension pot based annuity would yield. An even greater impact is seen on death because the ISA saver would leave behind a hefty sum of over £43,000 to be passed on the surviving family members and next of kin compared to just over £13,000 that would come from annuities; a noticeable difference.

Some critics see ISA’s as a risky move because they depend on market growth, stocks and investments. Annuities no doubt are a safer bet because it essentially guarantees a fixed income for a specified amount of time. However retirees have the ability to draw more income from their pension in the event the market sees growth.

The continuing decline in annuity rates has shaken the confidence of the people. Latest reports indicate that only 46% of UK workers are paying into a workplace pension, the lowest numbers on record yet. If you are one of those individuals who are starting on retirement planning early or already have a substantial amount saved up in a pension pot, preferably over £100,000, you should give ISAs some serious thought. Sit down with an annuity expert from Annuity Marketplace for a consultation and consider all your options.