pensions - good or bad?

[silverdaler]

my son is 25 and paid into a pension for a few years. he moved jobs and there is no pension scheme with this job. is there a better alternative to pensions nowadays. would he be better off with Tessa's or ISA's - i am in the dark about this subject and would welcome any advise.

thankyou

[buildersmate]

TESSAs were superceded by ISAs. One of the (few) decent aspects about pension funds is that the sums that are paid into them are made gross, without deduction of income tax. Which makes them more efficient as a means of saving for a pension.

[WendyS]

Your son can either take out his own SIPP (Self Invested Pension Scheme) which will give him tax relief on his contributions. However, he will not be able to draw on this until he reaches a specific age (which I believe has now been changed from 50 to 55).

Or, he can take out an ISA every year up to a maximum value of �7,000, either putting all �7000 into equities (unit trusts), or up to �3000 in a cash ISA, and up to �4000 in unit trusts. The cash isa is effectively a building society or bank deposit account which does not have tax deducted from the interest. Any income from the unit trusts can be reinvested until he needs to draw it as pension. ISAs are more flexible than pensions in that you can withdraw the money at any time However, unless the government changes its mind, ISAs are due to be withdrawn in 2009 so your son may want to take advantage of them while they still exist. If your son leaves his ISA's (either cash or unit trusts) untouched until he retires, they will be free of Capital Gains tax and he will not have to pay tax on the income drawn from them. (Unless some future government reneges on current promises of course !)