17th September 2016 at 11:00am
Where to invest first?
When it comes to making sure that we’re in a position to provide for ourselves for a rainy day and when we retire – that should be one of our top priorities and it’s never too early (or late) to start. But when it comes to choosing how to save or where to invest our money, such as ISAs vs pensions – it can raise more questions than answers.
That’s why we’ve come up with a handy guide that compares ISAs and pensions so you can find the best savings option for you.
Do we have a winner?
Well this will depend on your own circumstances.
If you are below the age of 55 then you’ll need to think about when you might need access to the money whilst weighing up making the most of the unique tax incentives available when you save into a pension for the longer term. But by the age of 55 pensions and ISAa are all accessible in a similar way – with no limits on what can be taken and when. And the investments under both benefit from tax free growth.
So for example if you’re 25, you’re still at least 30 years from being able to get your hands on the money in your pension so you might be swayed more towards investing in a stocks and shares ISA, where you can have more immediate access but if you’re 50 then you’re just five years away so you might be keen to invest more in your pension to benefit from the tax incentives.
Even if you can’t maximise both allowances, a combination of investing in an ISA and a pension is likely to be the best approach. Pensions will always win when it comes to tax efficiency but if flexibility around accessing your money is important to you, then an ISA is a good choice.
So why not make the most of both products? You’ll get the best of both worlds and you’ll have more options as you save for now and for the future – when you retire.
Remember pensions and stocks and shares ISAs are investments. The value of any investment can go up or down and may be worth less than what was paid in.
The information in this blog or any response to comments should not be regarded as financial advice and is based on our understanding in July 2016.
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