ISA or pension?

Pay put into a pension gets tax relief going in, and most of it is taxed coming out. Pay put into an ISA is taxed first, and nothing is taxed coming out. This page works out what the same pay comes to each way, using the comparison Oxygene Finance runs for its members, on 2026/27 rates.

Your figures

It opens on an example: £5,000 of pay on a £64,000 salary, drawn in 20 years at the basic rate. Change any of them. Your figures stay in this browser. The sums run on this page; nothing you type is sent to us or kept.

Pay to put away, before tax (£)

The same pay goes into one or the other.

Yearly salary before tax (£)

It sets the Income Tax relief going in.

How the pension is paid

Employer adds to the pension, £ (optional)

Only on the pension route.

Income Tax rate on the pension when it is drawn

It depends on how much is drawn each year, alongside the State Pension and any other income.

Years until it is drawn

Growth above inflation, % a year

4% is the app’s own starting assumption. The same growth is used for both.

On these figures

On these figures, £5,000 of pay before tax comes to about £9,300 from a pension and £6,600 from an ISA after 20 years, in today’s money: about £2,700 more from the pension.

From the pension £9,300 £5,000 goes in. A quarter of what comes out is tax-free; Income Tax at 20% on the rest is about £1,600.
From an ISA £6,600 £3,000 goes in: the same pay after Income Tax at 40%. Nothing is taxed coming out.
Difference £2,700 More from the pension: 41.7% more than the ISA.
Tax relief going in 40% Basic-rate relief the provider adds, and any relief above it, on a salary of £64,000.

An ISA can be reached at any time. A private pension can be reached from 55, or from 57 after 5 April 2028, depending on date of birth. The pension bridge calculator works out what that means for stopping work early.

In today’s money, on 2026/27 rates.

Figures follow the law as it stands. Announced and draft changes are not included.

How it is worked out

The relief going in is the Income Tax the pay would otherwise pay, worked out from the salary on 2026/27 rates as they apply in England and Northern Ireland. In the band from £100,000 to £125,140, where the Personal Allowance shrinks, it is higher than the higher rate. With relief at source the provider adds basic-rate relief (20%) even when less tax was paid, and relief above that comes through Self Assessment.
Both routes grow at the same rate. A quarter of what comes out of the pension is tax-free and the rest is taxed at the rate chosen; what comes out of an ISA is not taxed.
Salary sacrifice also saves employee National Insurance, which goes into the pension, as the app’s own comparison counts it.

What it leaves out

When each can be reached. A pension is locked until the minimum pension age; the pension bridge calculator works out what that means for stopping work early.
The Lump Sum Allowance, which caps tax-free cash at £268,275 across all of a person’s pensions.
The yearly limits: £20,000 into ISAs, and the pension annual allowance of £60,000.
Higher-rate relief on relief at source, which is claimed through Self Assessment. It is counted here as received.
What happens on death, charges, and Scottish Income Tax.

More on the assumptions behind the app’s own projection: how the retirement figures are worked out.

Questions

How does tax relief on pension contributions work?

Relief is given at the Income Tax rate paid on the money going in. With relief at source the provider adds basic-rate relief at 20%, and relief above that is claimed through Self Assessment. Net pay and salary sacrifice take the contribution from pay before tax. Relief is limited to contributions of up to all of a year’s earnings.

Source: GOV.UK

How much of a pension can be taken tax-free?

Usually up to a quarter, and no more than £268,275 across all of a person’s pensions: the Lump Sum Allowance. The rest is taxed as income when it is taken.

Source: GOV.UK

When can money in an ISA or a pension be reached?

An ISA at any time. A private pension from 55 until 5 April 2028, and from 57 from 6 April 2028. Some schemes carry a protected pension age.

Source: GOV.UK

Other calculators

Keeping the figures

This page forgets your figures when you leave it. Oxygene Finance runs the same sums on your own pensions, ISAs, savings and property, for one or two people, and keeps them up to date as your figures change. Features and plans shows what is free and what is Premium.

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Oxygene Finance provides information, not financial advice. Figures are estimates based on what you enter and on assumptions you can change. For decisions that matter, a regulated financial adviser or an accountant can look at your whole situation.