Are there any benefits of opting out of my workplace pension and putting the money into an ISA?

12 October 2021

Got a question?We'll put your question to our panel of helpful advisers

Question by Alex

Hi, I moved to England when I was 38 and have been making regular monthly payments into my work pension since of around £230 every month. I know I won’t be able to access this money for another 30 years+ so I am planning to opt out of the pension and put the cash into a ISA. Would there be any benefits in doing this?


Answered by Joshua Gerstler

Hi Alex,

Pensions are very tax efficient tools so it might be worth considering this in more detail.

You do not say how long ago you moved to the UK, but you are likely to be able to access your pension sooner than you think. Current legislation allows you to access your pension from age 55. On the assumption that you have been in the UK for one year, that means you could access it in 16 years. If you have been here longer, that will be sooner.

There is very generous tax relief on making contributions into your pension which you will not get with an ISA. That being said, you will be taxed on some of the money when you take it out of your pension which you would not be with an ISA.

I would look at this within the bigger picture of your financial planning and not just based on the tax treatment of the two.

I hope that helps!

Josh

Answered by

Joshua Gerstler

Chartered Financial Planner

I have been working in Financial Services for over 16 years. I started out at Deloitte where I trained and qualified as a Chartered Accountant before moving to Financial Advice/Planning at The Orchard Practice in 2011.