Call Richard Cook: 07770 575 122

email: richard@theinvestmentandretirementcoach.co.uk

ISA or Pension – is there a right answer?

For most people, pension plans are still the right way to save for retirement. With up to 45% tax relief they offer one of the most tax efficient ways to save for later life. If an employer contribution is available that’s even better, so make sure you don’t miss out.

What we all need in retirement are one or more passive income streams so building up an ISA portfolio alongside your pension plan can provide the best of both worlds.

Below are three key reasons why ISA investments should be part of your overall retirement income strategy.

  1. Tax-free income and capital. Once you have taken the 25% maximum tax free withdrawal of your pension fund any further withdrawals are taxed as if they are your earned income. With an ISA all UK income and capital gains are tax free, so having the opportunity to draw down from either or both provides tax planning opportunities which could be very useful in retirement.
  2. Accessibility. Currently, pension funds are locked away until age 55. However, ISAs offer you the flexibility to take money out when you want. If you are not sure how much you can afford to lock away until age 55, use an ISA first and then transfer to a pension and claim your tax relief later. That is particularly useful if you are a basic rate tax payer now but expect to be paying higher rates of tax in the future.
  3. Generous allowances. The rules surrounding tax allowable pension contributions are complicated and ever changing. The ISA contribution limits have been increasing over recent years and now stand at £20,000 per annum. If you are fortunate enough to have the funds available it won’t take many years to build up a sizeable tax free portfolio.

So what’s the conclusion?

Grandma knew best.

“Don’t have all your eggs in one basket” was always her advice and she was absolutely right. The best strategy of all is to make sure you have more than one passive income stream in retirement. Pension fund, ISA portfolio, buy-to-let portfolio, continuing business income… all have a part to play. So my advice is “don’t put all your eggs in one basket“.

I hope that’s helpful. If you need any further help or guidance just phone or text me on 07770 575122.


This document and our on going services are not personal advice. We'll give you all the help and guidance you need to make your investment and retirement decisions, but we can't advise you. If you're not sure whether you need regulated financial advice we can put you in touch with a suitably qualified and experienced regulated adviser. Because we are not regulated by the Financial Conduct Authority you will not have access to the Financial Ombudsman Service in respect of any complaints. If you use one of the "no advice" on line services to handle investment transactions they will be Regulated and you will have access to the Ombudsman and The Financial Compensation Scheme in respect of their services. The value of investments/pension plans can fall or rise depending on market performance. The Retirement Team and The Investment and Retirement Coach are trading names of Capture Success Ltd Reg No 01825075 Tel 07770575122

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