Saving the same money out of your take-home pay, which leaves you better off in the end — a pension or a Stocks & Shares ISA? A pension gives you tax relief going in and a 25% tax-free lump sum, but taxes the rest on the way out; an ISA gives no relief but is completely tax-free later. This works out both, after tax, on your numbers.
Assumes the same money leaves your take-home either way, growth is the same in both, and the pension's taxable 75% is taxed at the single retirement rate you choose. Pension tax relief and the 25% tax-free lump sum (capped £268,275) follow current rules; salary sacrifice also saves National Insurance today (though from April 2029 sacrifice above £2,000/yr will start to attract NI). ISA allowance is £20,000/yr; the pension annual allowance is £60,000 (or 100% of earnings). Pensions are normally locked until age 57 (from 2028); ISAs can be accessed any time. This is general guidance, not financial advice.
For most people saving for retirement a pension usually wins, thanks to tax relief going in and a 25% tax-free lump sum, especially if your employer matches contributions. An ISA wins on flexibility and if you expect a higher tax rate in retirement than the relief you get now.
From age 55 (rising to 57 in 2028) you can usually take up to 25% of your pension pot tax-free, capped at £268,275. The remaining 75% is taxed as income when you draw it.
An ISA can leave you better off if you will pay a higher tax rate in retirement than your relief rate now, or if you need access before age 57. The calculator shows which option wins on your own numbers.
You can put up to £20,000 a year across ISAs, and up to £60,000 (or 100% of your earnings if lower) into pensions with full tax relief.
These results are estimates for general information only and are not financial advice. Check every figure yourself and seek appropriate advice from a qualified professional before making any decision. Read the full disclaimer.