Case Study: Pension or ISA – which is best?At age 55 Dave earns £170,000 per annum and makes a £15,240 (net) pension contribution and a £15,240 ISA contribution.
On ceasing work at age 65 Dave decides to draw both investments as a lump sum. As he has no other income he is a Basic Rate taxpayer.
|Values in plan||Exit values||Pension advantage|
The pension provides an additional return of £10,641.
If Dave was a 40% taxpayer in retirement, the additional return provided by the pension would be reduced to £5,320.
EQ private clients have the choice of investing via an Investment Account, an ISA or SIPP. Here are the pros and cons of each.
If you are short of the funds needed to make maximum use of your pension contribution allowance it might be worth considering withdrawing some funds from your ISA.
One of the common planning mistakes is not making use of your annual Isa allowance