Ah, good, someone’s just calculated some stats I made up years ago

I wrote something in this a long time ago about statistics that I described as “conceptually true” – figures that are completely unproven, and very likely wrong, but still cast useful supportive light on concepts that are in fact true.  (For example, that when he gets a chance inside the penalty areas Jermain Defoe is less likely to miss than any other Premiership striker.  Or that in blind taste tests, consumers regularly agree that Stella is by far the nastiest of all lagers.)

In this week’s Financial Adviser, the columnist Tony Hazell quotes new figures that prove that standard rate taxpayers saving regularly for 40 years will have a larger pot at the end of the period if they save in an ISA rather than in a pension.  There’s not much in it – £330,000 plays £328,000 – but bear two additional points in mind.

First, the pension example that Hazell uses is a low-cost stakeholder, with charges of 1.5% p.a.  For anyone in a high-cost, old-fashioned pension, the difference would be far greater.

And second, remember that the money in the ISA suffers from none of the restrictions affecting the money in the pension.  You can take as much or as little out as you want, tax-free, at any time (up to and including a 100% tax-free lump sum when you retire).  And you’re never under any obligation to buy an annuity:  your choice of draw-down strategies is infinite.

OK, it’s different for higher-rate taxpayers.  And from 2012 onwards, Personal Accounts will make even the 1.5% annual charge that Hazell uses in his sums look expensive.  But still, for now, and for basic rate taxpayers, he has well and truly let the cat out of the bag.  For many, both within and outwith the industry, these figures will come as a revelation.

Not me though.  Without a shred of hard evidence, I’ve been quoting very similar figures for years.  I’m not surprised.  Just mildly relieved.�

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