Understanding the Basics
Both ISAs (Individual Savings Accounts) and SIPPs (Self-Invested Personal Pensions) are tax-efficient ways to save for your future, but they serve different purposes and come with different benefits.
ISA Benefits
Tax-Free Growth
No tax on interest, dividends, or capital gains.
Flexibility
Access your money whenever you need it (except for Lifetime ISAs).
Annual Allowance
£20,000 per tax year (2023/24).
SIPP Benefits
Tax Relief
Get tax relief on contributions at your marginal rate.
Employer Contributions
Employers can contribute directly to your pension.
25% Tax-Free
Take 25% of your pension pot tax-free from age 55 (57 from 2028).
Pro Tip
Consider using both ISAs and SIPPs to maximize tax benefits and maintain flexibility in your savings strategy.
Making Your Choice
Your choice between an ISA and SIPP should depend on your goals, time horizon, and tax position. ISAs offer flexibility and tax-free withdrawals, while SIPPs provide tax relief on contributions but restrict access until retirement.