Pensions or ISAs?

The popularity of ISAs has continued in recent years as more and more people take advantage of tax-efficient savings even if rates are terribly low they might be better than pensions. Some have even thought to ask Enable’s IFA’s of Bishop's Stortford whether an ISA is actually a better bet when it comes to retirement saving. Undoubtedly both have their benefits but when it comes to saving for retirement, which is better?

The thing about pensions is that you get tax relief up front on contributions so a contribution of £100 becomes £125 in your pension - and higher-rate tax payers can claim higher relief. As growth is on the higher sum, this gives pensions an important advantage, as there is no tax relief available on payments into an ISA. But investments held in both ISAs and pensions enjoy the same tax-favoured treatment of income and capital gains so there is no difference there.  Remember when you come to withdraw money from your ISA no tax is payable whereas pension income is taxable. However, you can take up to a quarter of your pension fund as tax free cash.

Pensions are more complex than ISAs, and governments involvement in changing pension rules in recent times, which has led to uncertainty and it is true you can access your ISA at any time - you have to be at least 55 to benefit from your pension. However, having free access to your money may actually make it more tempting to spend the money saved in your ISA.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE