Pensions vs ISAs

FUTURE PROOF: Have some spare cash to tuck away from the taxman before year end on April 5? We explore which tax wrapper is more efficient for investors

Emma Wall 26 March, 2014 | 4:09PM

Investors – act now or risk losing your tax-free ISA or pension allowance for the 2013/14 tax year. You have until April 5 to shield £11,520 in an ISA, and the annual pension allowance is £50,000.

The recent Budget revealed great changes due to the way both ISAs and pensions work. This summer the annual ISA allowance jumps to £15,000, and investors will be able to move their accrued lump sum between cash and investment ISA wrappers.

The annual pension allowance falls to £40,000 on April 6 this year, but those retiring after April 2015 will have the freedom to drawdown all of their pension savings to spend as they wish, instead of being forced to purchase an annuity. While some workers may still buy an annuity for the peace of mind afforded by securing a regular annual income, this week the head of one of Britain’s biggest insurers L&G predicted the annuity market will shrink to a quarter of the size it is today – a loss of £9 billion in business for providers.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Emma Wall  is former Senior International Editor for Morningstar

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