Pension vs ISA calculator
A pension often ends up worth more than an ISA for the same take-home cost, because tax relief on the way in outweighs the tax paid later, helped by the 25% tax-free pension cash allowed under gov.uk's pension tax relief rules. For a £1,000 net contribution, the pension here is estimated to be about £125 ahead of an ISA.
How do the tax rules differ between a pension and an ISA?
Both wrappers grow free of tax inside. The difference is at the two ends. A pension gets income tax relief on the way in, under gov.uk's pension tax relief rules, so the take-home cost buys a bigger starting sum, but three quarters of it is taxed as income on the way out. An ISA gets no relief on the way in, so the same take-home buys a smaller sum, but every penny comes out free of tax. The 25% tax-free pension cash is usually what tips the balance towards the pension.
What would a £1,000 contribution be worth in each?
A basic-rate taxpayer saving £1,000 of take-home pay gets 20% relief in a pension, turning it into £1,250 invested. Growing that by the chosen multiple gives £2,500. A quarter, £625, is estimated to be tax-free, and the rest taxed at 20%, leaving £2,125 net. The same £1,000 in an ISA grows to £2,000, all of it free of tax. The pension is estimated to end up about £125 ahead here.
Does flexibility matter as well as the numbers?
The figures are only part of the comparison. Pension money is locked until age 55, rising to 57 from April 2028 under gov.uk's rules, while ISA money is available at any time. Any chance of wanting the cash before retirement adds value to that access, which the pure numbers do not capture. A combination of both wrappers can suit many savers.
Common questions
Is a pension or an ISA better?
The two are taxed differently rather than one being better. A pension gives tax relief on the way in and is taxed on the way out, with a quarter normally free of tax, while an ISA is funded from taxed income and pays out free of tax. A pension cannot normally be accessed before the minimum pension age, whereas an ISA can be accessed at any time.
How do the tax rules differ between a pension and an ISA?
Tax relief means a basic-rate saver gets £1 in the pension for 80p of take-home, and a higher-rate saver for 60p. That head start compounds. Even after paying income tax on 75% of the pension in retirement, and getting 25% tax-free, the pension typically ends up ahead. In this example the pension is worth about £125 more.
When does an ISA make more sense?
An ISA can suit someone who might need the money before pension age, someone who is a higher-rate taxpayer now but expects to still be higher-rate in retirement so loses the rate advantage, or someone who has already used the pension annual allowance. ISAs also pass on more simply outside the estate rules that pensions face.
Can I use both?
Yes, and many savers do. A common approach is to pay enough into a workplace pension to get the full employer match, then use an ISA for money that may be wanted before retirement, then return to the pension for the rest. They are complementary wrappers rather than alternatives.
What would a £1,000 contribution be worth in each?
For a £1,000 net contribution at 20% relief, the pension is grossed up to £1,250, grows to £2,500, and after 25% tax-free cash and 20% tax on the rest, is estimated to leave £2,125 net. The same amount in an ISA is estimated to grow to £2,000, all tax-free.
Does flexibility matter as well as the numbers?
Yes. Pension money cannot normally be accessed before age 55, rising to 57 from April 2028, while an ISA can be drawn on at any time. That access has a value beyond the pure return, particularly for anyone who might need the money before reaching pension age. The right balance depends on individual circumstances.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.