ISA or pension? The same pay, side by side
The same pay set aside in an ISA and in a pension: the yearly income each gives after tax, side by side, and the years before the pension can be reached that only the ISA can pay.
Setting aside £6,000 a year before tax from age 30 to 50, a yearly income after tax from age 57 to 100 of
- From an ISA
- £5,311
- No Income Tax on it. £3,854 a year goes in, because the ISA is paid from pay that has already been taxed.
- From a pension
- £8,268
- After £0 a year of Income Tax, an average 0.0% of what is taken. £6,000 a year goes in, because the tax on it is saved.
These are an example's figures, in today's pounds: replace them with yours. Neither is better in itself. Which gives more depends on your tax rate now, your tax rate in retirement, and whether the money is needed before the pension can be reached.
No Income Tax is due on the pension income here, because it is inside the Personal Allowance and no other income is entered. Other income in these years, such as the State Pension, would use up that allowance first: enter it below. Employer contributions are not counted. They go into the pension only, so they often tip the choice towards it.
Side by side
An ISA against a pension for the same pay set aside, in pounds
Goes in each year
ISA £3,854
Pension £6,000
Pot at 50
ISA £106,665
Pension £166,059
Pot at 57
ISA £131,185
Pension £204,232
Taken each year, before tax
ISA £5,311
Pension £8,268
Income Tax each year
ISA £0
Pension £0
Spendable each year
ISA £5,311
Pension £8,268
Can be taken from age
ISA any
Pension 57
Income Tax saved on the pension contribution now: £2,146 a year, 35.8% of what you set aside. Income Tax paid on the pension income later: an average 0.0%. The calculator takes a quarter of each withdrawal tax-free, up to the lump sum allowance.
The bridge to the pension
You stop at 50, and with your date of birth the normal minimum pension age is 57. The bridge, the years in which the pension cannot be touched and the ISA or other savings has to pay, is 7 years.
- ISA route: pot when you stop
- £106,665
- ISA route: paid level over the bridge
- £16,622
The pension route has no money you can reach in those years. The ISA route has its own pot, shown here paid out a year at a time over the bridge. The same pay cannot be in both, and anything spent in the bridge is not left for later, so the table above, which leaves both pots untouched until the pension age, shows more than you would have then.
Income Tax bands are England, Wales and Northern Ireland's for 2026 to 2027. Scotland's differ and are not used.
Both pots grow at the same return, with each year's amount paid in at the start of the year, and are drawn as one level amount from the later of your stop age and the pension age to 100. Not modelled: the Lifetime ISA, employer contributions (which often tip it towards the pension), National Insurance and salary sacrifice, Scotland's rates, the Personal Allowance taper, and inheritance tax. The link carries your figures after the #, so you can save or share it. Your figures are not sent to us.
How the two are worked out
- You enter the pay you set aside each year, before tax. A pension takes all of it, and the Income Tax on it is saved at the rates your earnings are taxed at.
- An ISA takes the same pay after that Income Tax, up to the ISA allowance of £20,000.
- Both pots grow at one return above inflation, the same for both, with each year's amount paid in at the start of the year.
- Both are drawn as one level amount a year from the later of your stop age and the minimum pension age to 100. The ISA pays it with no Income Tax. A quarter of each pension withdrawal is tax-free up to the lump sum allowance, and the rest is taxed with the other income you enter.
- The years from your stop age to the minimum pension age are the bridge: the pension cannot be touched, and the page shows how long the ISA pot lasts at the pension route's income.
What the page holds fixed
Today's pounds. Earnings, the amount set aside, the bands, the allowances and the other income are held at their 2026 to 2027 amounts, in today's pounds, which assumes they rise with prices. HMRC has said the Personal Allowance and the basic rate limit are held at their current levels from 6 April 2028 to 5 April 2031, and the higher rate threshold until 5 April 2031; the freeze is not modelled.
Where the page can mislead. Earnings above £100,000 lose Personal Allowance, which this page does not model. A pension payment above the annual allowance of £60,000 can carry a tax charge. Both are flagged when they apply.
What is not modelled. The Lifetime ISA, employer contributions, National Insurance and salary sacrifice, Scotland's rates, the Personal Allowance taper, the money purchase annual allowance, and inheritance tax. Each can change your answer. This is a planning aid and not financial advice: a regulated adviser or HMRC can help with your own case.
Questions people ask
- Should I put money in an ISA or a pension?
- This page shows what each gives; it does not pick one for you. For the same pay set aside, a pension takes all of it and the Income Tax on it is saved, but the income it pays later is taxed (up to a quarter of what is built up can usually be taken tax-free) and cannot be reached until the minimum pension age. An ISA takes what is left after Income Tax, pays its income tax-free, and can be reached at any age. Which gives more depends on your tax rate now, your tax rate in retirement, whether an employer adds to the pension, and when you need the money.
- Is the tax saved now worth more than the tax paid later?
- That is the question the two numbers answer. The tax saved on the pension is at the rate your earnings are taxed at today; the tax paid later is at the rate your retirement income is taxed at, after the tax-free part. The calculator shows both rates: the saving as a share of what you set aside, and the average tax on the pension income. If the first is higher, the pension route gives more spendable income from the same pay, all else equal; if it is lower, the ISA route does. Return and inflation are one assumption for both, so they do not decide it.
- When can I take money from a pension?
- The normal minimum pension age is 55 before 6 April 2028 and 57 on and after it, by the date you take the money and not your date of birth. Pension schemes for the uniformed services stay at 55, and some people have a protected age or can take money out earlier for ill health. The calculator uses the normal minimum pension age and does not model the exceptions.
- How is money from a pension taxed?
- You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum, and the most you can take is £268,275: the lump sum allowance, GOV.UK says. The rest is taxed as income with the rest of your income that year. The calculator takes a quarter of each yearly withdrawal tax-free until the allowance is used up and taxes the rest with the other income you enter, at the 2026 to 2027 rates for England, Wales and Northern Ireland. Taking the whole tax-free sum at once is not modelled.
- Is an ISA taxed?
- You do not pay tax on interest on cash in an ISA, or on income or capital gains from investments in an ISA, and you can take money out at any time without losing the tax benefit, GOV.UK says. You pay into it from pay that has already been taxed, and in the 2026 to 2027 tax year the most you can save in ISAs is £20,000. The calculator caps the ISA at that and says when it does.
- What about retiring before the minimum pension age?
- A pension cannot normally be touched until the minimum pension age, so the years between stopping work and then must be paid from savings outside it, and an ISA is the usual place because its income and gains are tax-free. The calculator counts those years and shows how long the ISA pot at your stop age lasts at the pension route's yearly income. It is a way to see the gap, not a plan: your own spending in those years, and other savings, change it.
- What if my employer pays into my pension?
- Not modelled. An employer's contribution is money into the pension that you cannot get by paying into an ISA, so it often tips the choice towards the pension for the amount it covers, and the pension route here would be understated. Check your scheme for what your employer adds. Salary sacrifice and the National Insurance it can save are also not modelled.
- What about a Lifetime ISA?
- Not modelled. A Lifetime ISA is one of the four kinds of ISA GOV.UK lists, with its own rules on who can open one, how much you can pay in, and taking the money out. The calculator treats the ISA as an ordinary one.
- Does this work in Scotland?
- No. Scotland has its own Income Tax bands. The calculator uses the bands for England, Wales and Northern Ireland and does not model Scotland's.
Sources: GOV.UK, Individual Savings Accounts, the lump sum allowance, tax on your pension, Income Tax rates and Personal Allowances, HMRC's policy paper on maintaining the thresholds, the annual allowance and the Finance Act 2004, section 279 (the normal minimum pension age).