Reviewed by Mustafa Bilgic
Founder, WebCalculator
Tax relief rates per gov.uk/tax-on-your-private-pension. ISA allowance per gov.uk/individual-savings-accounts. Not financial advice.
This pension vs ISA calculator compares how much you end up with after tax in each wrapper. Enter your monthly contribution, tax band, employer match and expected growth to see which leaves you richer at retirement — factoring in tax relief going in and tax on pension withdrawals coming out.
Net outcome after tax
The pension and ISA are both tax-advantaged, but the tax benefit lands at different stages. A pension gives tax relief on the way in (boosting contributions) but taxes most withdrawals. An ISA uses post-tax money going in but everything coming out — capital, growth and income — is completely tax-free.
The pension also benefits from employer matching, which is essentially free money that ISAs cannot replicate. For most employees, contributing at least enough to get the full employer match is the highest-return, zero-risk financial move available.
| Tax band | You pay (net) | Gross in pension | Cost of £100 gross |
|---|---|---|---|
| Basic (20%) | £80 | £100 | £80 |
| Higher (40%) | £60 | £100 | £60 |
| Additional (45%) | £55 | £100 | £55 |
An ISA has no upfront relief: £100 into an ISA costs you £100 of post-tax income. The pension is therefore "bigger going in" — the question is whether the tax on withdrawal wipes out that advantage.
Pension wins when: you pay higher-rate tax now but expect to pay basic rate (or less) in retirement; your employer matches contributions; you do not need the money before age 57; you want to reduce your current tax bill.
ISA wins when: you are a basic-rate taxpayer who will also be a basic-rate taxpayer in retirement (tax wash, but ISA gives flexibility); you need access before age 57; you have already maximised your employer match; you want no restrictions on when or how you withdraw.
ISA wins for the self-employed. Self-employed people have no employer match, so the pension's main advantage is tax relief alone. A higher-rate self-employed earner still benefits from pension contributions, but a basic-rate sole trader may prefer the flexibility of an ISA — especially if income is variable and they might need access to savings during a quiet period.
Salary sacrifice boosts pensions further. If your employer offers salary sacrifice, both you and your employer save National Insurance on the sacrificed amount. The employer may pass their NI saving (15%) into your pension, increasing the contribution beyond what you could achieve with relief at source alone.
| Pension | ISA | |
|---|---|---|
| Minimum access age | 55 (57 from 2028) | Any age |
| Tax on withdrawal | 25% tax-free, 75% taxed | 100% tax-free |
| Annual allowance | £60,000 (2026/27) | £20,000 |
| Inheritance | Tax-free if die before 75 | Tax-free always |
The Lifetime ISA (LISA) is a hybrid: you get a 25% government bonus on contributions (up to £4,000/year = £1,000 bonus), and it can be used for retirement (from age 60) or a first home purchase. However, withdrawing for any other reason incurs a 25% penalty, which actually reduces your capital below what you put in. For pure retirement saving, the LISA bonus is less generous than higher-rate pension tax relief (40% vs 25%), but for basic-rate taxpayers who want flexibility, it sits between a pension and a standard ISA in attractiveness. The annual limit counts within the £20,000 ISA allowance.
For a deeper analysis of LISA growth, see the Lifetime ISA calculator.
The pension tax relief calculator shows the exact relief on contributions. Use the ISA calculator to project ISA growth over time, and the early retirement calculator to plan a FIRE strategy combining both wrappers.
A pension gives upfront tax relief (20% or 40%) and often employer matching, making your contributions go further. An ISA gives no upfront relief but withdrawals are completely tax-free, and you can access the money at any age. For most people, pension is better for long-term retirement saving; ISA is better for flexibility and pre-retirement access.
When you contribute to a pension, the government adds basic-rate tax relief of 20% automatically. If you pay £80, HMRC tops it up to £100. Higher-rate taxpayers can claim an additional 20% through self-assessment, effectively making a £100 contribution cost only £60 out of pocket. Additional-rate taxpayers save 45% on contributions.
No, except in cases of serious ill health. The minimum pension age is currently 55 and rises to 57 from April 2028. ISAs have no access restrictions — you can withdraw at any time without penalty or tax, making them ideal for savings you might need before retirement.
Yes. When you take money from a pension, 25% is tax-free and the remaining 75% is taxed as income at your marginal rate. If you are a basic-rate taxpayer in retirement, you effectively get tax relief at your working rate and pay tax at a potentially lower rate in retirement — a net gain.
The annual ISA allowance is £20,000 for 2026/27. This can be split across Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs (which has its own £4,000 sub-limit). All growth and withdrawals within an ISA are tax-free.
If your employer matches pension contributions, always contribute enough to get the full match — it is free money. After that, the choice depends on your tax rate and access needs. Higher earners benefit most from pension tax relief. Those who want flexible access or expect to pay the same tax rate in retirement may prefer the ISA.
Yes. The calculator includes an employer match percentage. Employer contributions are essentially free money that only goes into a pension, not an ISA. Even a modest 3% employer match can more than offset the tax-free withdrawal advantage of an ISA over 20-30 years.